Bank of Portugal not informed by Resolution Fund on the purchase of 4.14% of Novobanco

The Resolution Fund set up to provide liquidity to Novobanco in the wake of the collapse of Banco Espírito Santo in 2014, recently invested €128.67 million to acquire 4.14% of the capital of Novobanco.

However, the Bank of Portugal, which provides important technical and administrative services to support the smooth operations of the fund, was told nothing.

According to Jornal Económico: “The Bank of Portugal was not consulted or informed of the decision”, said the Governor of the Bank of Portugal, Mário Centeno on Friday at the presentation of the bank’s June Economic Bulletin.

“The Resolution Fund enjoys this independence which is why it did so within this autonomy”, stressed the governor.

The last financial reports from the Resolution Fund for 2022 showed that the fund had a debt of €6.383Bn (from Novobanco) and €1.29Bn from seven national credit institutions.

However, instead of choosing to pay off this debt, the fund preferred to invest by increasing its position in Novobanco.

“The Resolution Fund has its own mechanism of financing which has been in operation for some time”, said Centeno, also highlighting that the fund has a “number of very clear functions in legislation”, so it may “do everything that it can that is based on these functions.”

Without going into the reasons for the operation, Centeno highlighted that the only thing in question was which of the entities within the parameters of the State holds the 4.14% of the assets capital conversion rights for deferred taxes, be it the treasury or the Resolution Fund.

Asked whether the investment would have some impact on the budget, the Governor of the Bank of Portugal said that since it was a transfer within State parameters it would not have an impact on the budget.