Novo Banco's toxic credits may be transferred to the NPL platform. The Resolution Fund will have a say on the matter, by means of the Capital Contingent Mechanism.
Novo Banco’s toxic credits may be transferred to the NPL platform, and it will be the entity itself that will propose which credits will be integrated in the platform, according to Jornal de Negócios. This way, the Resolution Fund will be able to function as a resource to cover possible losses with sales or with restructuring operations that may be agreed for NPLs.
This measure includes credits that are protected by the Capital Contingent Mechanism, which can dictate injections by the Resolution Fund. Last December, António Ramalho, head of Novo Banco, had stated that the portfolio of the bank’s toxic assets was assessed in 5.4 billion euros.
Since these credits are managed according to Novo Banco’s internal norms, the entity may decide that it makes sense to include them in the Platform, where CGD and BCP are also included, and which receive credits that are common to at least two out of the three banks.
Therefore, the Resolution Fund will be able to include these proposals and, considering it is an entity financed by banks’ contributions, “it should always have a say about transactions around assets covered by Novo Banco’s mechanism”. This means the Resolution Fund may enter with 3.89 billion euros to cover possible losses from those assets, in case of a deterioration of NB’s ratios or a devaluation of those assets.