Brussels has approved the €3 billion the Portuguese taxpayers may have to pay to sort out the Banif scandal, but helpfully adds that "banks cannot be kept artificially afloat using taxpayers' money."
European Commissioners said they have long expressed concerns about state bailouts and taxpayer funded rescues. This did not stop commissioners giving the OK for more of the same as, after all, it’s not their money.
Brussels, suddenly alert after a long period of inactivity, approved the Novo Banco restructuring plan as it ‘provides a focus on retail banking.’
Brussels not only approved the scheme but was OK about extending the period of sale for Novo Banco to August 3, 2017, not that it has much choice in the matter.
The grand plan at Novo Banco, led by Stock da Cunha, is to ‘focus on retail banking and to reduce non-strategic areas of business and geography.’
‘Under this plan, Novo Banco should improve its profitability and efficiency, adjusting to market realities and continue adequately to meet the requirements to which it is subject,’ read today’s uninspiring press release outlining a strategy which hopefully he has been following anyway.
Over at Banif, Portugal’s Finance Minister Mario Centeno said today that there was evidence of electioneering as the previous government had done nothing to resolve the Banif situation in 2015 as it knew the hideous truth and it is an election year.
Mario Centeno was speaking to reporters after the Council of Ministers meeting this morning. Those attending had no option but to approve an amended 2015 budget - with a few billion added to the year’s overspend due to the Banif fiasco.
“Three years ago Banif had State aid that was classified as ‘temporary’ by the European Commission. Eight restructuring processed were submitted to the government and not one was approved."
The Prime Minister, António Costa, admitted on Sunday that the sale of Banif to Santander for €150 million was a "very expensive" solution, but it is the one that "best defends the national interest."
The Santander sale option was taken, according to the PM, "while taking into account the protection of depositors, the protection of jobs, the protection of the economy particularly in the autonomous regions, and the stability of the financial system."
The prime minister said he had been "faced with an emergency which was known about by the previous government for over a year."
What was said at the time of Banif's first bailout?
The then Minister of Finance said the injection of public funds into Banif "was preceeded by a rigorous and thorough preliminary analysis by the Bank of Portugal.”
In June 2014, the Finance Minister Maria Luís Albuquerque was questioned by Left Bloc MPs before injecting public money into the problem bank, "Has the ministry of finance made a study on the potential losses of Banif?”
Albuquerque said, "The injection of public funds at Banif was preceeded by a rigorous and thorough prior analysis of the viability by the Bank of Portugal as to the amount of public investment required."
“The Bank of Portugal announced as reasonable that the recapitalisation plan submitted by Banif, which even in an adverse macroeconomic context is appropriate and it supports the conclusion of a long-term viability for the institution and its repayment of public investment."
In 2013, Carlos Costa the Governor of the Bank of Portugal assured MPs that the injection of capital into Banif, €1,100 million, would be recovered and even make a profit.
Costa said on February 1, 2013, that the State will make money on Banif shares as they rise and that it had bought in to Banif at a discounted price. He was addressing members of the Parliamentary Committee on Budget and Finance, dispalying his trademark lack of grasp as the very real problems at the bank whose shares lost 99% of their value in a year before being suspended last week.
Damage to deficit target
The mess at Banif and the resolution cobbled together by an incompetent Bank of Portugal and the new governemnt will push the deficit over 4% for the year. The €2 billion plus damage set aside to encourage Santander to pay for Banif is enough to add a full percentage point to the country's borrowings as a percentage fo GDP.
A sum of €750 million has been agreed to cover Santander for any losses on the assets that the Spanish bank is taking on, showing yet again that when it comes to doing a deal Carlos Costa is the man to have sitting opposite you at the table.
With even former Minister of Finance Maria Luis Albuquerque now saying the Bank of Portugal and regulation are unhappy bedfellows, Costa must resign or be fired, and soon.
