Novobanco asks €209 million from Resolution Fund

Despite making a profit in 2021, Novobanco, the bank led by António Ramalho, has gone cap-in-hand to the Resolution Fund for €209.2 million to bolster a shortfall in its capital ratio of 12%.

The application looks unlikely to succeed because the director of the fund created to capitalise the bank when it was set up in 2014, Máximo dos Santos, sees no reasons why further cash transfers to the bank should be made.
It would mean that the Resolution Fund and Novobanco could end up in a court of arbitration. The fresh request has been justified on the grounds that the bank needs to make up for a shortfall in the bank’s capital ratio levels by applying for the cash via the contingent capital mechanism.
The funds relate to 2021 when the bank made a profit of €184.5 million. The bank states it needs the cash because of the impact of the new accounting regime and a contingency linked to property taxation.
Even the Portuguese President, Marcelo Rebelo de Sousa, has balked at the cash request comparing the problem — using the words of a well known Portuguese expression meaning never-ending — to “the works of Santa Engrácia’ (a Lisbon church that took 130 years to build).
“At the these times (dealing with) the end of the pandemic and war, we don’t need works of Santa Engrácia” he said adding he would await “the bank’s general assembly meeting which is scheduled for the end of March, and after the Government is sworn in, to gauge what the Government’s attitude and that of the Resolution Fund will be”.
Novobanco (called Novo Banco before it brand change in 2021) ended up saddled with part of the Banco Espírito Santo’s business activity (BES) after that bank was wound up in 2014. Novobanco was sold in 2017 to the US fund Lone Star which holds 75% of its capital with the remaining 25% held by the Resolution Fund which is managed by the Bank of Portugal.
The Resolution Fund was set up in 2012 with a mission to provide financial and other support to certain banks which had suffered financially in the wake of the Great Recession and Sovereign Debt Crisis between 2008-2014, measures that were applied by the Bank of Portugal.