Portugal won't renege on Novo Banco commitments - finance minister (updated)

Banco Espirito Santo SA em Liquidacao

27/11/2020 12:49

(Adds details, background)
    LISBON, Nov 27 (Reuters) - Portugal's finance minister said
on Friday the state would comply with all its commitments
related to Novo Banco after opposition parties blocked a 476
million euro ($567.53 million) capital injection for the lender
next year.
    Novo Banco, which emerged from the collapse of Banco
Espirito Santo (BES) in 2014, is 75% owned by U.S. private
equity firm Lone Star and 25% by the state-backed Portuguese
Resolution Fund. 
    Under the contract agreed on its sale to Lone Star in 2017
the Resolution Fund must inject up to 3.9 billion euros if
certain losses occurred from the sale of toxic assets inherited
from the collapsed BES.
    Loss-making Novo Banco has been offloading bad loans, real
estate and non-core assets under restructuring commitments
agreed with Brussels and the Resolution Fund has already
injected almost 3 billion euros into the bank to cover those
losses.
    In its annual budget for 2021, submitted to parliament on
Thursday, the government had proposed that the Resolution Fund
inject a further 476 million euros into Novo Banco next year but
the proposal was rejected by the centre-right main opposition
Social Democrats and hard left lawmakers.  urn:newsml:reuters.com:*:nL8N2IC40D
    Social Democrat leader Rui Rio, however, told reporters that
his party would vote in favour of this new capital injection if
a pending audit shows it is fair and correct. 
    Finance Minister Joao Leao said the state would meet its
obligations to the bank.  
    "Portugal will meet, as it has always done, its commitments
assumed regarding Novo Banco," Leao said in a short statement
sent to Reuters without providing further details. 
    Prime Minister Antonio Costa tweeted later on Thursday that
he had called European Central Bank President Christine Lagarde
to assure her of Portugal's "full compliance with the
commitments undertaken in the framework of Novo Banco's sale".
    Opposition parties fear Novo Banco could be benefiting Lone
Star by selling it discounted non-performing assets, which
inflated Novo Banco's losses. The bank and Lone Star have denied
this.  urn:newsml:reuters.com:*:nL8N2FZ3QO 
    

($1 = 0.8387 euros)

 (Reporting by Sergio Goncalves; Editing by Andrei Khalip and
Susan Fenton)
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