The Portuguese State will lend up to 450 million to the Resolution Fund to finance Novo Banco

The Resolution Fund will have to inject 792 million euros in Novo Banco. From this amount, the State will lend a maximum of 450 million euros. The rest will come from the Fund itself.

“The exact amount of that [State] loan is not yet set, but it is estimated that it will not go over 450 million euros, standing beyond the 850 million euros’ annual limit, inscribed in the State Budget”, the Resolution Fund stated in a press release disclosed this Wednesday. This amount is in line with the information disclosed first-hand by ECO.

With the partial sale of the bank to Lone Star, the Resolution Fund committed to making payments to Novo Banco up to 3.9 million euros, in the case of a decay in the assets and capitalization levels of the institution. It was the case of 2017, after historic losses of over 1,390 million euros announced this Wednesday, mostly due to the high level of impairments.

The Resolution Fund says it will firstly use the financial resources it has from the banking sector. The remaining will come from a Treasury loan. In order for that to happen, the Resolution Fund, which works with the Bank of Portugal, will have to send a request to the Finance Ministry, which will then authorize the loan.

The 792 million euros’ payment to Novo Banco will be made after a legal certification and after a verification procedure, from an independent entity, to confirm if the amount to be paid by the Fund was correctly ascertained.

In that same press release, the Fund headed by Máximo dos Santos discloses that it has already spend 4.9 billion euros to support Novo Banco, the institution that was created in August 2014, with the resolution measure applied to BES.

“Since than, the Resolution Fund did not make any other payment related to Novo Banco, but it has inscribed in its accounts, referring to 2017, a 792 million euros’ provisions concerning the payment to be made in 2018”, the Fund further states.