Novo Banco’s losses could reach €1 billion in 2017 with the Resolution Fund on alert to inject more capital which it is unlikely to have.The bank, 75% owned and controlled by American vulture fund, Lone Star, embarked on an aggressive policy of 'recognising losses' on toxic assets which, under the terms of the sale agreement, are the responsibility of the Resolution Fund supported by injections of cash from Portugal’s high street banks and topped up by loans from Portugal's taxpayers.
The accelerated write-offs reflect a requirement from the European authorities which want to clear bad debts quickly - this suits Lone Star which wants to return the former BES to profit in preparation for a probable sale in not less than three years time.
The government, aka Portugal's taxpayers, may well have to top up the Resolution Fund with a further loan if this institution's funds are not sufficient to cover the write-offs at Novo Banco.
Expresso’s Saturday edition concludes that taxpayers will have to inject up to €850 million to support the Resolution Fund under the terms of the sale agreement to cover the bank’s impairments.
Novo Banco’s record losses for 2017, of several hundred million euros, maybe as much as a billion, will necessitate a taxpayer loan two years earlier than expected.
The sale to the vulture fund contained clauses that left the Resolution Fund and taxpayers in the unenviable position of having to support futher losses as bad debts are written off by a management over which the State has no control.
