Lisbon says €6.6bn boost makes banks 'Europe's most capitalised'
PORTUGAL IS to inject state capital totalling €6.6 billion into three of the country’s largest lenders, making them among the “most capitalised banks in Europe”, the finance ministry said yesterday.
The announcement came as finance minister Vítor Gaspar said Portugal had complied with all the conditions set by international lenders during the first year of its €78 billion bailout programme, clearing the way for payment of the next €4.1 billion instalment of rescue funds.
After the fourth quarterly review of the adjustment programme by the European Commission, International Monetary Fund and European Central Bank, Mr Gaspar added that Lisbon had met “every quantitative and objective criteria” set by the so-called troika.
The “structural transformation” under way in the economy was proof the adjustment programme of deficit reduction and economic reform was the right path for Portugal.
Any measures to stimulate domestic demand would only worsen the country’s problems, he added. Growth had to come instead from making Portugal more competitive internationally.
Mr Gaspar said the funds to be injected in Banco Comercial Português, Banco BPI and state-owned Caixa Geral de Depósitos would ensure they met the requirements for core tier-one capital ratios, a key test of financial strength set by the European Banking Authority.
In return, the banks would support economic growth through corporate lending, including a specific commitment by BCP and BPI, both listed, to invest a minimum of €30 million each a year in the capital of small and medium-sized companies. About €5 billion of the funds to be injected into the banks will come from a €12 billion Bank Solvency Support Facility created within Portugal’s €78 billion bailout package.
EBA stress-tests in December found Portuguese lenders needed to raise just under €6.95 billion to attain the minimum 9 per cent requirement for core tier-one ratios by the end of this month.
BCP is to draw €3 billion in state funds and raise a further €500 million through a rights issue. BPI will draw €1.3 billion from the state and raise another €200 million from a rights issue. The state will inject €1.65 billion directly into CGD.
State capital is expected to be injected into the banks in the form of so-called high-trigger contingent convertible bonds, or “cocos”, which convert into equity if a trigger such as a bank’s core capital ratio breaches a predefined floor.
Mr Gaspar said the state was also ready to support other banks. However, Banco Espírito Santo, Portugal’s largest listed lender by market value, has opted not to draw on state funds, instead raising €1.01 billion in a recent rights issue.
Under the terms of Portugal’s bailout, conditions for accepting state capital include “specific management rules, a restructuring process and restrictions in line with European Union competition requirements”.