Novobanco is ‘reviewing’ the Arbitral Court’s decision that ruled in favour of the Resolution Fund in a $169 million dispute

Novobanco says it is “reviewing” the International Court of Arbitration’s decision, which ruled in favour of the Resolution Fund in a €169 million dispute.

In a statement sent to CMVM, the bank led by António Ramalho explains that the court’s decision shows the legitimacy and good faith of its decisions, namely by “recognising Novobanco’s right to have opted for the full implementation of IFRS 9.”

However, the Arbitral Court also considered that “the disputed issue was not expressly contemplated in the contract” between the two parties, arguing that the Portuguese bank “could not use the contingent capital agreement calls (“CCA” mechanism) to pass on the cost of the decision to reverse the IFRS 9 transitional arrangements.”

According to Novobanco, “this decision defers IFRS 9 deduction to CET1 in €66 million in 2021 and €66 million in 2022, rather than €132 million in 2021.”

This is one of several disputes opposing the bank and the Resolution Fund, under the contingent capital mechanism created in 2017 with the sale of Novobanco to Lone Star.