Portugal’s new development bank open for business in October
The Portuguese Government’s new development bank will become a reality within 40 days.
According to the Government, it has approved the final version of what it is calling the Banco de Formento and in October will “begin a wide range of operations” according to the minister for the Economy, Pedro Siza Vieira.
The Bank of Portugal has given the green light to the institution and legislation will come into force within 40 working days and this year will develop wide range of operations by October.
The Portuguese Development Bank will be able to undertake direct credit lending operations to companies, manage State guarantees and company capitalisations, as well as helping to prepare companies to export and go international.
In the next few days the Government will merge the Financial Development Institution (IFD) and SME Investment into the Portuguese Mutual Guarantee Company (SPGM).
According to preliminary versions, this merger, winding up of the previous entities and total transfer of IFD and SME Investment (PME Investimento) will be automatic and will not depend on any formality.
On the other hand, the State organisation which helps SMEs, IAPMEI, will have to buy the share that private entities still have in SPGM (0.63%).
The institution will retain its headquarters in Porto, will have from between 9-11 board members and the current SPGM board will remain operational until a new board is appointed.
The appointment of a president and vice president will be the responsibility of the institutions four shareholders.
IAPMEI will hold 47% of the bank’s capital, the General Directorate of the Treasury andFinances will hold 40.88%, the Portuguese tourist board Turismo de Portugal will hold 8.1% and the overseas investment agency AICEP will hold 4.02%.
The distribution of shares will mean that there will be a shift in influence away from the Ministry of Finance and to the Ministry of the Economy.
The new institution will operate with a share capital of €255 million, an amount resulting from the total share capital of each of the institutions that will comprise the new bank now rechristened the Banco Português de Fomento (The Portuguese Development Bank).
That means €150 million from IFD, but also a capital share that the State currently has in Capital Ventures, and the share that Turismo de Portugal has in TF – Turismo de Fundos and the inclusion of reserves corresponding to SPGM profits.
Siza Vieira stressed that a capital share of €225 million is identical to the amount that the Development Bank of Ireland or England have.
“This amount will enable us to lend a significant amount of credit” adding that the institution will inherit from SPGM the management of the mutual counter guarantee fund.