Home News Portugal cuts state bailout for BES to 3.9 bn euros: minister

Portugal cuts state bailout for BES to 3.9 bn euros: minister

Published on 07/08/2014

Lisbon will cut its bailout for stricken Portuguese lender Banco Espirito Santo to 3.9 billion euros thanks to contributions from the financial sector, Finance Minister Maria Luis Albuquerque said Thursday.

The state had initially pledged 4.4 billion euros ($5.9 billion) in aid as part of a 4.9 billion euro rescue package for BES announced on Sunday in a bid to stop its collapse plunging the fragile economy into further crisis.

“The state will grant a loan, which now is limited to 3.9 billion euros because the banks wanted to take on their responsibilities in a more direct and immediate manner,” the minister said in parliament.

“The repayment of the loan to the Treasury and taxpayers will take place, no matter the time or the amount for which the new bank will be sold,” said Albuquerque.

“The responsibility belongs exclusively to the financial sector,” she added, adding that the loan will be paid back in the next two years.

BES, once one of Portugal’s largest lenders, was in dire straits after reporting a record loss last month, while three of its parent companies had filed for bankruptcy amid allegations of accounting fraud.

On Sunday it was announced it will be split into two banks: Novo Banco will take the capital injection and all of the bank’s viable assets, while the so-called “bad bank” BES will house all of its toxic assets.

The opposition had alleged that rescuing the bank could place a fresh burden on taxpayers already struggling with austerity measures imposed during the eurozone debt crisis.

Other Portuguese banks on Tuesday proposed to increase their contribution to the rescue fund to 635 million euros in the hope that the new bank will be able to be sold faster to pay back the state.

Portugal’s stock market has plunged this week led by a collapse in banking shares. On Thursday, its main index ended the day down 2.27 percent at 5,453.29 points.