EU and Portugal agree 4.6-bn-euro bailout for CGD bank

The EU and Portugal have agreed on a 4.6-billion-euro deal to recapitalise the state-owned Caixa Geral de Depositos (CGD) bank, the European Commission said Wednesday.

The deal was approved by European Union competition chief Margrethe Vestager to meet the 28-nation bloc’s tough rules on preventing unfair government aid for businesses.

Portugal’s banks have been under huge stress after the collapse of the country’s major lender Banco Espirito Santo in 2014 due to years of risky lending.

“Commissioner Vestager has last night reached an agreement in principle with the Portuguese authorities on the way forward to enable a recapitalisation of CGD on market terms,” a European Commission spokeswoman said.

The fact that the deal would be on market terms means it does not qualify as illegal state aid, the spokeswoman said.

The Portuguese government will inject up to 2.7 billion euros into CGD and convert 900 million euros of investments into capital, while the bank itself has promised to raise one billion of capital of subordinated debts.

The European Commission will now formally take a decision on the agreement.