Portugal’s Prime Minister has accepted a request from António Domingues, the president elect of Caixa Geral de Depósitos, to recapitalsie the bank with €4 billion of taxpayers’ money.
This request is one condition set by Domingues before accepting the top job at the State owned lender. He is due to start work on May 25th and wants also to have the government imposed cap on salaries lifted so he and his colleagues can be paid as much as other bank directors, or more.
Portugal’s newspapers have been full of the recapitalisation story today while speculating whether Costa actually has given these demands the green light.
What is clear is that the PM has been busy seeking opinion from within Brussels as further State aid to Portugal’s banking is not high on the list of ‘popular things to do when you’re in charge.’
The injection of state money in Caixa Geral de Depósitos has to be approved by the European Commission and Prime Minister António Costa needs the nod from the leaders of the Single Resolution Board and the European Central Bank's supervisory board: it would help also if Mario Draghi was in favour.
Despite the swirling speculation, a deal has not formally been presented to Brussels but the European rules from the Directorate-General for Competition do allow the injection of State money into a State bank if this is done in under 'similar conditions applying to a private investor.'
The €4 billion is far more than Caixa needs at the moment but is a condition set by Domingues for taking on the job of running the bank.
The deal is being pitched as ‘an investment’ and not as further State aid to Portugal’s fragile banking sector.
António Costa, said today that there is no "final decision" yet on a possible cash injection for Caixa, but admits it is being discussed and that the Caixa board has sent him details of a restructuring programme.
Comments
Of course, the Peters are correct.
Poor Portugéses - the tax-PAYING ones..
Caixa became fully taxpayer owned in the late 60s and Peter is right, why not sell part of CGD off to raise the money or go to the open market and issue a bond for the money Caixa says it needs?
Because the taxpayer yet again is to take the full risk of another Portuguese bank in poor shape.