Banco de Portugal (BdP) and the Resolution Fund today considered that the Court of Auditors’ audit of Novo Banco demonstrates that there are no impediments to the injection of public money into Novo Banco.
The Court of Auditors today released the audit of public financing to the New Bank requested by parliament, and communications from Banco de Portugal (banking supervisor) and the Resolution Fund (entity that holds 25% of Novo Banco, chaired by the vice-governor of Banco de Portugal Máximo dos Santos) were released.
Banco de Portugal argues that the audit allows the injection of at least EUR 430 million this week to cover last year’s losses.
Both entities agree that the audit demonstrates that the contracts made within the scope of Novo Banco, namely the contract of the contingent capital mechanism by which the State has capitalized the bank, must be complied with.
They also highlight the conclusion of the audit that the public capitalization mechanism has been fundamental for the stability of the financial system.
In its statement, Banco de Portugal says that this audit is a “complement” the procedures that already exist to assess the legitimacy of public money received by Novo Banco, considering that the audit demonstrates that the contract must be fulfilled.
“Banco de Portugal’s full conviction is, therefore, that the demanding conditions for the continuation of normal execution of contracts, thus allowing its mission of preserving financial stability to be fulfilled, as confirmed by the Court of Auditors ”, reads the statement from Banco de Portugal.
The Resolution Fund also said that the audit “does not identify any impediment to the fulfillment of the commitments and contracts that result from Banco Espírito Santo’s resolution process, which started in August 2014”.
Both Banco de Portugal and the Resolution Fund also report that the audit concluded that public financing for Novo Banco is essential for the preservation of financial stability.
“The Court of Auditors concluded that the public financing of Novo Banco, through the Contingent Capitalization Agreement, competes for the financial system stabilitymainly because it allowed the bank to be liquidated and the systemic risk to be reduced ”, says the statement from Banco de Portugal.
“As a central conclusion of the Court of Auditors’ assessment, it should be noted that the Court maintains that the public financing of Novo Banco, through the Contingent Capitalization Agreement, contributed to the stability of the financial system, since it allowed the liquidation of And the systemic risk is reduced, ”says the Resolution Fund.
Novo Banco was created in August 2014 in BES resolution. Just under the Contingent Capitalization Agreement, Novo Banco has already consumed 2,976 million euros of public money and, under the contract, can collect another 914 million euros.