Arab Today, arab today portuguese banking system faced systematic risk
Last Updated : GMT 00:03:59
Arab Today, arab today
Arab Today, arab today

Portuguese banking system faced systematic risk

Arab Today, arab today

Arab Today, arab today Portuguese banking system faced systematic risk

Bank of Portugal governor Carlos Costa
Lisbon - XINHUA

Bank of Portugal Governor Carlos Costa admitted on Thursday that the Portuguese banking system was facing a "systematic risk" last week, just days before he announced that bank Banco Espirito Santo (BES) would be bailed out by the government.
"We were on the razor's edge but we came out OK" Costa said at parliament, following a clarification by Finance Minister Maria Luis Alburquerque. "On Friday we were on top of systematic risk."
He added that he didn't expect the bank's debt to be so high in the first quarter.
BES saw a net loss of 3.58 billion euros in the first quarter amid corruption among board members which led the Bank of Portugal to announce a bailout plan of 4.9 billion euros.
Shortly before the plan was announced, Costa had said the bank had a "solid capital" and a "comfortable margin to deal with any eventuality," and wouldn't need to be bailed out by the government.
This was also echoed by Prime Minister Pedro Passos Coelho, who was later criticized by the opposition for remaining silent after the plan was revealed. He broke silence the day after, saying it was the "best" solution.
Costa insisted on Thursday that the solution found for the bank best defended the interests of both taxpayers and depositors and pointed out that the financial system had "understood that it was in its interest to participate in finding a solution."
He said he believed other banks in the Portuguese Resolution Fund system would contribute further.
Albuquerque confirmed on Thursday that the country would pump in 3.9 billion euros into BES, less than the 4.9 billion euros, explaining that this was due to contributions from the finance sector.
The clarifications made by the governor of the Bank of Portugal and the finance minister came after opposition parties demanded an "urgent" parliament committee meeting at parliament.
Opposition parties, namely the Socialist Party and the Communist Party, have been strongly against the idea of nationalizing the bank, saying that taxpayers will have to pay the burden.
However, the authorities insist that isn't the case, with the bank having been split into a "good" and "bad bank." The bad bank holds all toxic assets and liabilities while the good bank, which has been renamed "Novo Banco", houses viable assets like branches, employees and senior debtors.
Costa said the bank would now find investors to buy the new lender Novo Banco (New Bank), guaranteeing the sale would be "transparent." He also said a financial advisor would be hired by the bank.

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