Since 2014, following the Portuguese government decision to shut down the broke Banco Espírito Santo and thus creating a new bank (Novo Banco) to protect its clients, this process has already cost over €5 billion to public purse. And that amount is still on the rise, due to the bank’s recapitalization needs.

Over the last five years, Portugal’s Government have already injected €6.9 billion from the public money, although €3.9 billion came from a loan provided through the Resolution Fund.

After several efforts to sell the bank, in 2016 the US investment fund Lone Star acquired 75% of Novo Banco (with the Resolution Fund keeping 25%). However, the deal was that new owner would invest €1 billion in the bank’s capitalization instead of paying any price for it.

Under this agreement, was created a compensation mechanism for eight years and up to €3.8 billion from the Resolution Fund to fund for any loses caused by former toxic assets. Later, in 2017 the bank received €792 million from the Resolution Fund, of which €430 million from a public loan. And, in the end of February 2019 the bank requested another €1.149 billion.

At the end of the day, Portuguese coffers have lost €4.692 billion in capitalising Novo Banco, a sum which can rise to €5.841 billion if the new request is accepted.

But Portugal’s Finance Minister Mário Centeno has already said Novo Banco will get «not one euro» extra of public money, because the Resolution Fund loan will be paid in 30 years. «This recapitalisation will be made, once again, through a public loan but that does not mean the state is giving money to the bank», he explained to TV chanel RTP3.

Original Story: Eco News |Lusa 
Photo: Novo Banco
Edition:Prime Yield