Taxpayers shoulder Banif risk but depositors are 'safe'

Prime Minister António Costa today assured Banif account holders that their funds are safe. This has not stopped thousands of clients withdrawing their cash amid fears that the bank is on the point of collapse.

Costa was not so comforting to those with shares in the troubled lender, the taxpayer being the major shareholder with 60.5% of Banif’s stock, as any rescue after Jan 1st 2016 might involve losses for shareholders and certain classes of depositors.

The Prime Minister acknowledged the limited help the government can offer to Banif but, somewhat concerningly, pledged to do everything to ensure that the loss to taxpayers is "as small as possible."

In the fortnightly debate in parliament, António Costa, responding to a question from the Left Bloc’s Catarina Martins, said that Banif is seeking a buyer at the same time as the EC is looking at various rescue options.

Despite the critical state Banif has been left in by current management, the PM said, "Right now, and for the Banif depositors, regardless of the amount, no one has reason to be worried," but that no guarantee can be given to taxpayers who already are owed around €800 million from a previous Banif rescue.

Party leaders refused to divulge the content of last night’s emergency talks with the PM on the Banif situation but this did not stop MPs commenting on Banif and its track record.

According to the PM, at last night’s meeting with the governor of the Bank of Portugal, Carlos Costa, and members of his team, "they were kind enough to convey to the different parliamentary groups the information they have transmitted the Government."

Communist MP Paulo Sá said that he had been warning for ages of the problems at Banif, openly criticising its management and the regulator's lack of grasp.

"Right now, the Banif process is under discussion in the European institutions, the sale process is ongoing and under all circumstances the State always ensures the integrity of deposits, regardless of their amount," said the PM, adding a Yuletide “message of tranquility” to all “Banif depositors, either on the mainland or on the islands, and in the overseas communities."

According to the Prime Minister, Banif’s depositors "have every reason to be fully confident in the integrity of their deposits, regardless of their amounts." "As for the public money invested in the bank, it will depend very much on the final solution. I cannot give the same guarantee."

Asked about possible liability of the previous government for the present dire state of affairs at Banif, the PM said, "I do not think it is appropriate at this time that we start theorising about responsibilities."

"For now, at this moment, the responsibility is mine, to ensure the best outcome for the public interest and to better protect the interests of taxpayers. The two main things are the stability and confidence in the financial system, and the absolute guarantee to all depositors on the full protection of their savings," said António Costa.

Banif is under pressure to find a buyer for the government's stake, better still - for all the shares, with a Friday deadline set for the submission of proposals.

Since receiving state aid in late 2012, several restructuring plans have been sent to the Competition Directorate General of the European Commission but there is still no acceptable version and Brussels is concerned that the €1.1 billion thrown at Banif last time represents illegal state aid.

Now that the bank is failing again, Brussels remains non-committal on the last bail out, let alone any current one.

If the bank fails to find a buyer, urgent action will be needed.

EU rules state that all banks have to have prepared emergency plans in place but Banif seems reluctant to tell anyone what these are, or if they exist at all.

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