Eye-watering loans to Novo Banco are ‘stabilisation’ says Finance Minister
Government plans to inject another €1.0 billion into Novo Banco during 2020 and 2021, spinning the disastrous obligation as “a billion euro ceiling.”
The Government plans to transfer the €1.0 billion is part of the public guarantee for the US controlled bank, available until 2026.
This projection is after an injection of €1.941 billion in 2018, under the so-called contingent capital mechanism.
This means that the public guarantee of €3,900 million made available in 2017, when 75% of the bank’s shares were given away to Lone Star, has a billion left to be used by 2026.
These estimates are included in the Stability Program 2019-2023 released this Monday by Finance Minister, Mário Centeno.
The Minister of Finance spoke of “regularisation” and “stabilisation” of Novo Banco, when speaking to journalists today but however the complex figures add up, the leeway afforded this privately controlled bank is a running sore for the Treasury and the nation’s banking sector which has to find the money to prop up a market competitor.
“We have planned a stabilisation in the sense of reducing capital calls for a very simple reason: Novo Banco has had a positive evolution in its current activity, which is not associated with the legacy of toxic assets,” explained Centeno, stressing that if the institution had not been sold to Lone Star, Portugal would still be dealing with Brussels over deficit figures – a debatable assertion.
The bank, led by António Ramalho, will end up requesting a total of €2.941 billion from the Resolution Fund, a public entity that is financed by the country’s banks, topped up by loans from the Treasury through the contingent capital mechanism.
The chief executive of the bank considers the phased recapitalisation of the bank a “happy idea.”
However, at a meeting with the press at the bank’s headquarters in Lisbon, António Ramalho, said that the institution “does not react” and “will not comment” on the Government’s views.
“Novo Banco has its project, which was set in 2017 and therefore will naturally follow this path and will not comment on views from the Government,” said Ramalho.