45% increase on the rate for the Resolution Fund in 2017

The Portuguese banks will have greater costs with the Resolution Fund in 2017. The Bank of Portugal decided to increase the contributions made by financial institutions to the Fund to 0.291%, which represents a 45% increase compared to the current rate. At the same time, banks will pay more to the Deposit Guarantee Fund.

“The base rate to be applicable in 2017 for determining the periodical contributions to the Resolution Fund is 0.0292%”, is stated in an instruction text by the Bank of Portugal. Currently, the rate is 0.02%, having increased by 33% when compared to the 0.15% rate paid by banks in 2015. This increase implies a 45.5% worsening  of the charges endured by banks in the Portuguese system.

This rate, which concerns the monthly balances’ average value of the banks’ liabilities, finances the Resolution Fund, the vehicle used both for the resolution of the Portuguese banks BES and Banif. The Fund’s responsibilities rise to nearly five billion euros. The Resolution Fund has spent 3.09 billion euros in Novo Banco. The bank will be sold in order to repay that amount, although it will unlikely reach that value – the most valid proposal of acquisition is being made by Lone Star, who should increase the bank’s capital in two 750 million euros’ operations.

Deposits with more guarantees

Beside the increase in contributions to the Resolution Fund, banks will also have to pay more to the Deposit Guarantee Fund. The Bank of Portugal states: “Concerning the contribution rate to be made by each participant institution, the base contribution rate to be implemented in 2017 is 0.00014%”.

This rate represents an increase when compared to the 0.0001% currently being enforced. The Bank of Portugal highlights that “the minimum contribution amount to the Deposit Guarantee Fund, to be made by the institutions participant in the Fund, is 110 euros”; until now, the minimum contribution banks had to make to have their clients’ deposits assured was 80 euros.