BCP has €700M from pension fund to buffer against Poland shocks

 In Banks, News

The increase in interest rates has created a financial buffer of almost €700 million in BCP bank’s pension fund which can be used to reinforce the bank’s capital ratios in its Polish operation.

“We are very fortunate to have a buffer in the pension fund which we can draw on in a recession, or if the interest rates fall again, and will not have any impact in terms of capital”, said the bank’s CFO Miguel Bragança in a conference call with analysts that cover BCP.
“At the moment, we think it is more important to eliminate risk, or almost eliminate the volatility in the capital ratio caused by the pension funds. With the passage of time and depending also on our capital ratio level, this could change”.
Miguel Bragança had been questioned by an analyst on what leverages the bank had to boost capital ratios regarding the impact of the recent mortgage moratoria agreed by the Polish government.
The moratoria will inflict a €330 million cost in the third quarter for Bank Millennium that is 50.1% controlled by BCP.
Because Bank Millennium’s capital ratios will be in non-compliance as a result of the new law, the Polish bank has now activated a recovery plan to restore them.
This was the latest in a number of challenges the bank has had to face such as legal risks related to mortgage loans designated in Swiss francs issued before 2008 and which require provisions of €600 million.
This year, in addition to the impact of new moratoria, the bank has had another financial responsibility it had not been banking on. Bank Millennium had to contribute €54.3 million to the recently created Institutional Protection Fund which aims to assure stability in the Polish (banking) sector according to ECO online news.
A fortnight ago, the CEO of BCP Miguel Maya said that he trusted the management at Bank Millennium to be able to overcome what he referred to as “torments” and ruled out any capital increase because of problems in Poland.