Pandemic guarantees automatic injection in Novo Banco in 2021
The contract for the sale of the Novo Banco stipulates that the bank may receive more money from the State in a situation such as a pandemic.
The contract for the sale of the Novo Banco to the American Lone Star Fund stipulates that the bank led by António Ramalho may receive more money from the Portuguese government in a situation such as a pandemic. The impact of an extremely adverse scenario was contemplated and could be compensated by an automatic injection of the Resolution Fund to restore solidity, according to Público newspaper.
In November 2018, the governor of the Bank of Portugal, Carlos Costa, had already explained this in Parliament. “The agreement between the Portuguese state and the European Commission includes the commitment that the Portuguese state will make available to the Novo Banco capital limited to the needs to restore the required levels of capital in a scenario of extreme adversity,” he said, quoted by Público.
Antonio Ramalho already said he’ll need it. In an interview to Jornal de Negócios and Antena 1 and in which he stated that the “deterioration of the economic situation” due to the Covid-19 pandemic will lead to “slightly additional capital needs” to those initially estimated. According to Público, the automatism is triggered if the capital ratios fall below 12%, being at the end of the first quarter at 12.3%.
Marcelo Rebelo de Sousa said he was “astonished” by the news, which generated criticism from the Left Bloc and PSD. To date, the bank led by António Ramalho has received almost 3 billion euros from the Resolution Fund under the contingent capital mechanism.
