Carlos Costa: Lone Star is “a strong shareholder for Novo Banco”

Carlos Costa, the governor of the Bank of Portugal, is confident in the sale of Novo Banco to Lone Star and believes the North-American fund would be “a strong shareholder” in the transition bank and would bring stability to the Portuguese financial system.

"I am confident that will be the case, the prime minister has also stated he believes so. It would be very good for the stability of the financial system if the operation were to take place.”

“If we follow Novo Banco with a strong shareholder, that in addition to assuring diversity in the origin of capitals, has a business plan consistent with the financing of the economy and the financial stability. And if then we are able (as we have been) of showing Caixa Económica as a strong entity, we stand before a full-swing stabilization plan of the financial system“, stated the governor in an interview to the Portuguese newspaper Público.

The supervisor believes that, more important than the issues with shareholders, it is important “to assure the bank is not exposed to the shareholder”. “That’s where problems stem from. If a shareholder is in trouble, he sells his shares and his equity without affecting the bank. It only affects the bank if it benefits from credit. Credit between related entities cannot be accepted“, Costa explained.

Is it possible, nowadays, to have another case like BES? “We can be assured that nowadays the follow-up mechanisms are much stronger than in that time. We are assured that there is greater attention being paid to euphoria, in the expansion stages, in order to limit credit bubbles and real estate bubbles. We can be assured there are many intervention instruments if the issue is noticed in time. No one can anticipate an action before it has began”, stated the governor.