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New Finance Minister defends that ‘President of Novo Banco should focus on managing the bank well’, not asking for more money

61novo bancoAt a hearing of the Budget and Finance Commission, to discuss the Supplementary Budget, newly appointed Finance Minister João Leão said that “there is no budget planned for reinforcement at Novo Banco this year” and left a clear message to the president of the bak, António Ramalho. “You should focus on managing the bank well.”

Leão faced his first trial by fire in the Budget and Finance Commission to discuss the Supplementary Budget, but recent talks of a cash injection for Novo Banco meant that the minister was forced to throw his opinion into the ring also. Left Bloc MP Mariana Mortágua questioned him over why no government official has yet discussed that an adverse scenario, in the case of a pandemic for example, could lead Novo Banco to ask the Resolution Fund for more money.

João Leão replied: “These issues are out of time, the president of the bank should concentrate on managing Novo Banco well until the end of the year. That is his job”. He adds that, “at this moment there is no budget foreseen to reinforce Novo Banco in this Supplementary Budget”.

This topic stems from the fact that the president of Novo Banco, António Ramalho, affirmed in an interview with “Negócios e Antena 1” that the bank might have to ask the Resolution Fund for more money than was estimated, because of the economic impact of the current pandemic.

The minister took the opportunity to clarify that “no funds are foreseen beyond the 3.89 billion” that are under the purview of the Resolution Fund, within the scope of a set of problem assets “and that this amount” does not depend on any occurrence or crisis “. It should be recalled that of this amount Novo Banco has already asked the Resolution Fund for almost 3 billion euros. As for the question about the news from the Público newspaper, this Tuesday, which refers to a clause that the bank can apply in exceptional circumstances (such as a pandemic) to request a capital injection from the State, João Leão did not hesitate to reply: “The press confuses two different issues, one thing is that the pandemic is a reason to request this injection, another is that it is possible for Novo Banco to ask for more than the 3.9 billion foreseen, which isn’t happening”, he guaranteed.

“There is a confusion” between two different ideas, adds Leão. All banks may have capital problems that affect their normal operations because of the pandemic, explained the government official, and in that context they would have to “find mechanisms for injection from the shareholder himself” or the State “as a shareholder” (the Resolution Fund holds 25% of Novo Banco). But this, he stresses, “has nothing to do” with the contingent capital mechanism “under the purview of the Resolution Fund”. “It is of a different nature,” he concluded.