Governor of the Bank of Portugal in favour of Novobanco stock market floatation

The Governor of the Bank of Portugal (BoP), Mário Centeno, is in favour of the dispersal of Novobanco’s capital on the Euronext Lisbon stock exchange.

Novobanco is preparing an IPO (Initial Public Offering) within a context of a sale to another financial institution still on the table.

The IPO is expected to go ahead this summer. Quizzed at the Parliamentary Budget and Finances Commission about the bank’s future, Mário Centeno said that he wanted to see more banks listed on the stock market.

“There is a lot of talk about the capital markets but when (the opportunities) on the capital markets arise there is often apprehension”, he said.

As to State-run bank Caixa Geral de Depósitos buying the bank, the governor said that consolidation was a decision for the market while taking into account competition (authorities) and systemic risks.

However, Mário Centeno said he was keeping an eye on the future of the bank. “The Bank of Portugal will have to be attentive to the business plan as a result of any sale and its systemic consequences.”

As to the millions that were ploughed into the bank from its founding in 2014 through a Resolution Fund which maintained the bank’s liquidity and capital ratios, he assured that the Contingent Capital Accord which enabled transfer of money to the Resolution Fund was still the most efficient capitalisation instrument that existed in Europe to save banks in trouble.

“It was a huge success” he said, arguing that alternative solutions would have cost a lot more. The Contingent Capital Mechanism was designed under his predecessor, Carlos Costa. The Resolution Fund has injected some €3.4Bn into Novobanco to date, but the cost of sustaining Novobanco and writing off losses from the collapse of Banco Espírito Santo, the ashes from which it was created, have been estimated to have cost the Portuguese State, taxpayers, and Portugal’s banking system around €8Bn since 2014.