Banking fund part of Portuguese rescue: reports

21st April 2011, Comments 0 comments

The Portuguese debt rescue package being negotiated here could include a fund for banks having trouble in raising refinancing on the market, press reports here said on Thursday.

Officials from the European Union and the IMF have been holding crisis talks with political and business leaders since Monday to assess the state of public finances in Portugal which is at risk of debt default in about eight weeks' time.

The mission has also held talks with bank chiefs to establish how they have been affected by the sovereign debt crisis, Le Diario Economico reported.

Public bank CGD and private institutions BCP, BES, BPI and Santander-Totta were said to have been present at the talks.

Part of the rescue for Portugal, worth an estimated 80 million euros ($114 billion), could be used as a contingency fund to capitalise banks which are no longer able to refinance themselves via the market, the Jornal de Negocios reported.

The fund would "create a guarantee that would secure their success in European stress tests," the newspaper said, referring to tests of the capacity of banks to withstand economic crises. The outcome of the tests was expected in June, the report said.

The debt rescue talks are scheduled to end in the middle of May, before an early general election here on June 5 which is the result of a refusal by the right-wing opposition to approve cutbacks proposed by the outgoing Socialist government.

Lisbon has to have the package in place by June 15 when it has to repay nearly 5.0 billion euros ($7.3 billion) in maturing debt.

© 2011 AFP

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