Portugal's top three banks have decided to club together over those problem customers who owe all three of them money.
Some jointly held bad loans soon will be managed by a special team made up from managers at Caixa Geral de Depositos, Novo Banco and MillenniumBCP.
"Instead of negotiating with two or three banks at the same time, the debtor will negotiate only with the entity," according to Deputy Finance Minister, Ricardo Mourinho Felix.
The new body's executive board would propose which non-performing loans to restructure, based on evaluation work done by a committee of bankers and independent experts.
Ricardo Mourinho Felix and the Bank of Portugal agree this ‘debt-management platform’ is a good idea as it saves corporate debtors having to deal with three different banks at the same time.
Portugal’s banks have a mountain of bad debt which they steadily are writing off as their finances improve but the effect on ratios and their lending ability continues to cause deep concern and is hampering the economy.
Mourinho Felix, in an interview with Reuters, said the three banks' joint clean-up approach to bad debts would avoid the need for a taxpayer-backed 'bad bank' - something Spain and Ireland used during Europe's debt crisis at vast cost to taxpayers.
This ‘bad bank’ idea has been promoted at length by Carlos Costa at the Bank of Portugal as it shifts banking debts onto taxpayers, a move he would be delighted with but one that the government has not pursued, for now.
The joint-management approach to bad loans also “should help to put borrowers back on their feet, enabling them to attract new investors,” according to Felix, adjusting his rose-tinted glasses and skirting over the fact that loans still will have to be repaid.
The three banks setting up this new joint platform, although they have not confirmed this is the case, account for most of Portugal's bad loans, between €25 billion and €30 billion, a staggering amount and one of the biggest bad-debt mountains in European banking.
Of the three banks, Novo Banco, is in the poorest shape, carrying bad debts of a third of its loan portfolio and in the middle of a poorly thought-out hand-over to the US vulture fund, Lone Star.
Novo Banco was only meant to assume the ‘good bank’ loan book from the collapsed BES when the Bank of Portugal hatched its bizarre ‘rescue plan’ in 2014. Much of this ‘good bank’ loan book seems to have turned sour in the meantime.
It is unclear how many of these jointly held bad loans will be managed by the three banks involved but Mourinho Felix said the new body should start work before the end of the year.
