Selling Novo Banco for under €4.9 billion ‘will not threaten the solvency of any other bank’ according to the Bank of Portugal, preparing the market for a sale of under €4.9 billion.
José Berberan Ramalho, deputy governor of the Bank of Portugal also heads the Resolution Fund and said today that only when we all know the sum raised by selling Novo Banco will we know how much the other banks which paid into the Resolution Fund have lost.
The Bank of Portugal spokesman cheerily suggests that the central bank will ensure that none of Portugal’s high street lenders will suffer from insolvency as the financial system will support any losses.
"In any case, funding will be structured so as not to jeopardise the solvency of any bank and, of course, to preserve financial stability," said Ramalho.
Novo Banco received an injection of €4.9 billion when it was set up as a result of Banco Espiríto Santo going bust - € 3.9 billion was guaranteed by a taxpayer loan, €700 million was in the form of loan arranged by the Bank of Portugal and €300 million was from the Resolution Fund, topped up in a hurry from the other banks.
The government gets paid first so if the sale price is below €3.9 billion the taxpayer will lose out, but not by as much as the other banks unless the sale is bargain basement.
As for the other banks, any difference must be paid from their own reserves when they later top up the Resolution Fund as they do from time to time, according to Ramalho, indicating the Bank of Portugal may ask the banks to make a further ‘special contribution,’ a scenario which will lead to open warfare as Portugal’s banks have spent the austerity period shoring up their balance sheets and will not want more money lifted to pay for the dire mismanagement of BES by former Chief Executive Ricardo Salgado.
On the unlikely plus side, if Novo Banco is sold for more than €4.9 billion any surplus will revert to the old BES ‘bad bank’ and can be used to pay the shareholders and second tier creditors of the old BES.
Comments
That valuation may have made sense before BES's problems were known. But not now.
Certainly any Portuguese bank in the Resolution fund temporarily shoots itself in the foot with a low bid but it will have already checked with the other players who needs an opening in a particular area that BES was in. And what they will pay.
That is what golf courses and masonic lodges are for.
And where it makes sense to flatten the site and develop it.
The big question is what obstacles the Portuguese Government has put in place - as it has done with say the TAP national airline - assisted by the Portuguese banks; to screw up any foreign EU bank buying its way in.
Not exactly a European Union solution but then Portugal was never in the European Union.