Q: Novo Banco is the good bank rescued from Banco Espírito Santo [BES]. How are things progressing with sorting out the problems caused by BES's troubles? How does it impact on government finances?
A: Novo Banco was sold [US equity fund Lone Star has a 75% stake] in the context of trying to find a private sector solution that prevented the bank from being wound up. The bank is now operating and is still undergoing a very significant [attempt] to reduce a non-performing loan [NPL] book that was the highest in the country. The public retains 25% of the bank’s capital and is required to make capital injections if, on the sale of certain identified troubled assets, the value realised by the bank is below the book value, and this has an impact on the regulatory capital of the bank. These injections have a maximum amount and time to be made, and are adequately appropriated in the budget projections of the Portuguese government.
