Brussels assesses whether Portugal complies with Novo Banco’s contracts

  • ECO News
  • 27 November 2020

The European Commission is assessing whether Portugal's commitments towards Novo Banco are honoured.

The European Commission is “monitoring” the execution of Novo Banco’s commitments signed by Portugal in 2017, after the Portuguese parliament halted new injections into the bank.

“In 2017, the Commission approved, under the European Union’s state aid rules, the request made by Portugal for the sale of Novo Banco, on the basis of certain commitments assumed by the country. The Commission is monitoring the fulfilment of these commitments,” said the spokesperson for Ursula Van der Leyen’s team, quoted by Expresso.

On a proposal from Bloco, PSD, PCP, ENP, Chega and MP Joacine Katar Moreira approved on Thursday a halt to the injection of 476 million euros into Novo Banco by the Resolution Fund, which was foreseen in next year’s state budget.

At stake is the contingent capital agreement that forces the Resolution Fund to compensate Novo Banco up to 3.9 billion euros for losses incurred with a set of toxic assets and when these losses cause capital ratios to fall below regulatory requirements.

To date, the bank Resolution Fund has already injected about three billion into the bank.