Expatica news

Novo Banco needs another €850 million

novobancoshinylogoNovo Banco, led by António Ramalho, is to ask the Resolution Fund for yet another capital injection, this one will be for €850 million, under the terms of the gift of the bank to US vulture fund, Lone Star.

Novo Banco is preparing its ‘request’ to the Resolution Fund under the disastrous, contingent capital arrangement agreed by the Bank of Portugal when it handed over 75% of the bank’s shares to Lone Star, for free, with the proviso that the Resolution Fund injects money in Novo Banco whenever there are losses from asset sales that ‘impact the financial stability of the bank.’

Last year’s free money totalled €791 million, funded by the Resolution Fund which, of course, does not have this sort of cash lying around so calls on the Treasury to loan it the cash – for ‘Treasury,’ read ‘taxpayers.’

This latest call for funds is higher than Novo Banco’s guesstimate in the middle of last year when it floated a figure of €726 million.

Losses last year to September at Novo Banco, from the sale of assets below book value, were €420 million as Ramalho continues to clean up the bank’s balance sheet. The sale of bad debt and property portfolios, penalises the institution’s capital ratios and hence it draws on Portugal’s taxpayers to ease the pain.

The sale of 75% of Novo Banco’s shares to Lone Star included the creation of this contingent capitalisation mechanism which left taxpayers on the hook to a maximum of €3,890 million.

This loan facility is in addition to a horribly similar figure initially thrown at the problem in 2014 by Carlos ‘Mr Magoo’ Costa, the Bank of Portugal un-sacakable governor, when he created a so-called ‘rescue package,’ saying at the time that taxpayers would get paid back, “and may even make a profit.”