The government has met representatives from the main parliamentary parties to discuss the sale of Novo Banco, a process that the prime minister (pictured) and finance minister insist is going very well.
Even after today’s four separate meetings, with four sets of government officials each taking a political party, if the conditions of sale have to be discussed in parliament, a scenario being pushed heavily by the Left Bloc, there is little hope that the government’s current plan will face anything but opposition.
The Left Bloc’s Catarina Martins is sticking to her Monday sound bite that the solution on the table for Novo Banco is the "worst of both worlds, since the State takes the risk but does not participate in the bank’s management."
The Prime Minister, António Costa, said in Madeira today that he expects a deal to be done by the end of the week and that his government is busy agreeing the bank's future ownership model with the European Commission.
On the table is the scenario of the State holding 25% of the capital, selling 75% to the US vulture fund, Lone Star, but not being able to appoint directors and hence not participating in the management of the bank.
The Left Bloc wants the sale proposal to be discussed and voted on in parliament, determined that the bank stays under 100% State control.
The right of centre parties are remaining tight-lipped, saying only that they did attend a meeting, but described it only as ‘an information giving session.’
The sale of Novo Banco, created in 2014 with the healthy assets of the bankrupt Banco Espírito Santo, is but one of the important issues for the Portuguese banking system which has been rocked by bankruptcy, forced sales, inadequate supervision and court cases pursued with vigour by ripped-off customers.
The government has settled on Lone Star as the buyer, as recommended by the Bank of Portugal, and sees the US fund as the best candidate to take over Novo Banco which cost €4.9 billion to set up.
The details of the offer are unknown, but the ballpark figures are that Lone Star pays €750 million for 75% of the bank’s shares and later injects an undisclosed sum of between €750 and €1 billion to recapitalise the bank, although not necessarily using its own funds.
The European Competition Commissioner Margrethe Vestager said Monday that it is up to the Portuguese authorities to sell Novo Banco "in a fair and transparent manner," while the European Commission will oversee that the resulting business is "viable."
If Novo Banco is sold for less than the €4.9 billion used to create it, the difference will fall on Portugal’s high street banks which by law have to support the Resolution Fund. The taxpayer is still owed €1 billion and it will be politically expedient that this amount is repaid first.
The blind optimism of the PM and his Finance Minister, Mário Centeno, have clouded the fact that the whole sale exercise will result in a loss of billions of euros.
Centeno insists that the sale of Novo Banco “is going well,” although the deal had not been closed.
The Governor of the Bank of Portugal, Carlos Costa, reported to parliament that exclusive negotiations were underway with Lone Star, adding that the deal was complex.
"My hope is that after this process ends, the bank can be considered a case study on a European level,” said governor Costa, unaware that the process could well become a textbook study in ‘how to sell a bailed out bank as a multi-billion euro loss.’
Nobody will come out of this well and the forced jollity of those involved is designed to mask a poorly run process that makes Portugal’s government and financial regulatory system look amateur.
When Lone Star controls the bank and puts into effect is real plan for the business, the uproar in Portugal may well be long and loud.
