Portugal’s Finance Minister, Maria Luís Albuquerque, has ended months of fantasy land pronouncements by acknowledging finally that the participants in the Resolution Fund that bailed out BES are likely to take a hit, including Caixa Geral de Depósitos, i.e. ultimately the taxpayer.
"Caixa Geral de Depósitos, like all other banks, is subject to losses. Much depends on the price that Novo Banco is sold at," said the Minister today at a hearing of the Committee on Budget and Finance.
This marks a departure from her previous statements designed to assure the public by frequently use of a large terminological inexactitude.
Albuquerque stated to the committee today that possible public losses are the cost in Portugal of "having a public bank."
At issue is the €4.9 billion, of which €3.9 billion is a state loan, shovelled into the Resolution Fund to bail out BES by recapitalising it as Novo Banco.
"I'm not here to speculate whether the value of the future sale of Novo Banco will or will not exceed €4.9 billion," said Albuquerque, saying that it is not up to her to say whether something is worth more or less than a suggested value.
According to the minister, "up until the sale date the markets can speculate as to the eventual value but uncertainty is always the worst thing in markets."
For the minister’s sake the sale price had better be well in excess of the money advanced or she will join the growing list of incompetent ministers whose resignations have been called for, currently Education and Justice.
As for the BES bailout, Albuquerque still claims that "the market realises that, despite the risks, this was the solution that best safeguarded the public interest."
The market may or may not agree, she can not sanely speak on its behalf, but the acid test will be when bidding opens for Novo Banco which now sports unnecessary new branding at most of the old BES branches.
Albuquerque’s admission that the taxpayer is exposed, and unnecessarily so according to wide opinion, comes after an indefensibly long period of her assuring the public and the press that taxpayers money had not even been used, and if perchance it had, then it was as safe as houses.
This confused stance was plainly nonsense yet she stuck to this party line in the face of the reality, which made her look rather less competent than she would have the public believe.
"The State is a creditor of the Resolution Fund and not a shareholder," due to the loan of €3.9 billion that was thrown at the problem by the Bank of Portugal.
Whether ‘the State’ is a shareholder of creditor is immaterial if the price attained for Novo Banco is below the value of funds advanced to (re)capitalise it.
On August 3, 2014, the day that the Bank of Portugal took control of BES, the Ministry of Finance assured us that taxpayers would not have to bear the costs associated with this action. This is looking like an 'evens' bet at the moment.
