Economist, personnel specialist and former mayor of Oporto, Rui Rio, has called for the cancellation of the sale of the Novo Banco to Lone Star, saying that the government can’t simply “evade its responsibility.”
A lack of transparency and ever-changing rules are cited by Rio as he criticises the proposed sale of Novo Banco in an opinion piece in Observador.
"There seems to be only one ethical and morally acceptable position: to abolish this kind of competition with its constantly changing rules and to open a new one, where competition and equal opportunities are adequately safeguarded, or at least to set a deadline by which other potential candidates can apply under the current conditions" wrote the former mayor of Oporto.
According to Rio, the sale conducted by Sérgio Monteiro on behalf of the Bank of Portugal and the Resolution Fund (the sole shareholder of Novo Banco), had the rules "completely" changed during its execution. For example, it was not agreed to sell only 75% of the capital with the State now taking on a ‘contingent capitalisation mechanism’ that could force the Resolution Fund to face further losses of up to €3.9 billion.
These are aspects that were not envisaged but which ended up being written into the agreement with Lone Star at the end of March.
"By completely changing the rules of the game, the seller did not allow other potential competitors to be involved," said the Social Democrat.
The cancellation of the sale of Novo Banco is the best option, according to Rui Rio, "It is very evident that following this path could only have a positive effect on our public finances and our banking system."
At the moment, the Bank of Portugal is preparing for the exchange of voluntary debt by Novo Banco bondholders, an essential condition for the sale to Lone Star. Meanwhile, the UK based Aethel partnership, along with bondholders, has positioned itself for the acquisition of 100% of Novo Banco for around €3 billion, but its application was rejected by the Bank of Portugal.
Unlike with Banif, where Rui Rio admits that the António Costa Government had to resolve a different type of problem, the case of Novo Banco showed "the situation was already quite different and the Government can not evade its responsibility."
Rui Rio's message to the government is, "Given the size of what we are talking about, the brutality with which the banking system has penalised the Portuguese taxpayer and in the name of democratic transparency, the government can only take one of two steps: either it gives an opportunity to other potential competitors, or it explains why not."
