Home Forex Market News Portugal Central Bank Steps In To Rescue Troubled Lender

Portugal Central Bank Steps In To Rescue Troubled Lender

Portugal’s central bank unveiled a plan to rescue the country’s one of the largest lenders Banco Espirito Santo on late Sunday, after it reported a record EUR 3.6 billion first-half loss.

According to the plan, the general activity and assets of the troubled BES would be transferred immediately to a new company called Novo Banco.

The equity capital of Novo Banco, to the amount of EUR 4.9 billion, will be fully underwritten by the Resolution Fund. The Resolution Fund was set up by Portugal in 2012.

The loan granted by the State to the Resolution Fund will be temporary and replaceable by loans granted by credit institutions.

The funding of treasury will be repaid eventually by the sale of the new institution and this will safeguard public money, the finance ministry said.

The ministry said shareholders, subordinated debt holders and board members or former members with direct responsibilities for the recent events would be called to shoulder the losses incurred by the banking business and not the taxpayers.

Shares of BES would be delisted from the stock market. But, deposits are fully preserved, passing on no loss to customers.

Nothing changes for customers, who will be able to carry out all operations as usual and without disruption, the central bank said in a statement.

The European Commission today said the adoption of this resolution measure was adequate to restore confidence in financial stability and to ensure the continuity of services and avoid potential adverse systemic effects.

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