Resolution Fund puts Novobanco in court
The Resolution Fund (FDR) and the Bank of Portugal have instigated a lawsuit against Novobanco according to Negócios.
At issue is an order from a former minister of Finances, João Leão for a top-down analysis on part of the funds from the Resolution Fund which the bank applied for and are relative to 2020 accounts — a €112 million cash injection that the bank only got in December 2021.
In the arbitration process underway which pits Novobanco against the Resolution Fund, the bank is charged with calling into question the legality of this dispatch from João Leão, arguing that the Resolution Fund should have paid out the total amount requested, thereby meeting the contract signed with the US equity and asset management company Lone Star (which is the private shareholder in the bank) even if this amount had not been budgeted for in the State Budget.
To avoid future risks and surprises that could arise from the arbitration process, the supervisor of the Resolution Fund has chosen to also bring an administrative counter action against the bank.
Even though there is no arbitration decision over the differences between the bank and the fund on the 2020 accounts, the Government risks being forced to shell out the €5 million that has not been paid on time and stump up possible compensation.
This could create a precedent for a public company to be convicted over a contract under the Law for Budgetary Principles and could pave the way for public entities being forced to pay sums foreseen in contracts, even if these are not included in the budget or do not have government authorisation to make the respective transfer.
With the administrative counter action issued by the Resolution Fund against Novobanco, the Bank of Portugal and the Resolution Fund wish to demonstrate that there was no deliberate delay, that the fault in the delay in the transfer cannot be imputed to it, and that it was to safeguard the public interest.