Por­tu­gal’s banks may need more cap­i­tal: Cabral

The Pak Banker - - COMPANIES/BOSS -

Por­tuguese Econ­omy Min­is­ter Manuel Caldeira Cabral said some of his coun­try's banks might need more cap­i­tal and he'd wel­come for­eign in­vest­ment. "There are spe­cific cases where re­in­force­ment is pos­i­tive, but I don't think there is a wide­spread prob­lem with Por­tuguese banks," Cabral said in an in­ter­view at the World Eco­nomic Fo­rum in Davos. "I won't rule out the need for more cap­i­tal. I would wel­come for­eign in­vestors to use the op­por­tu­nity and the lower prices of the as­sets in the bank­ing sys­tem to re­in­force cap­i­tals."

Por­tu­gal's eight big­gest banks raised more than 26 bil­lion euros ($28 bil­lion) in cap­i­tal from 2008 through 2014, in­clud­ing state aid dur­ing the coun­try's in­ter­na­tional bailout and the Banco Espir­ito Santo SA res­cue by the cen­tral bank's Res­o­lu­tion Fund, ac­cord­ing to a Jan. 6 pre­sen­ta­tion from the Bank of Por­tu­gal.

The coun­try is fac­ing crit­i­cism from some in­vestors af­ter the Bank of Por­tu­gal in De­cem­ber de­cided to im­pose losses on cer­tain se­nior bond­hold­ers of Novo Banco SA, which emerged from the 2014 breakup of len­der Espir­ito Santo. So­cial­ist Prime Min­is­ter An­to­nio Costa on Jan. 15 said he ex­pressed his con­cern to the cen­tral bank about how those bond­hold­ers were treated.

Cabral on Fri­day re­it­er­ated that the Novo Banco de­ci­sion was taken in­de­pen­dently by the cen­tral bank and said he doesn't think more "op­er­a­tions" like th­ese will be needed. "Of course it wasn't pos­i­tive for in­vestors and we are look- ing into that to guar­an­tee the con­fi­dence in the coun­try," he added.

"There is some spec­u­la­tion and some of the agents in the mar­ket are a bit un­happy about the cen­tral bank's so­lu­tions for Novo Banco," Cabral said. While Por­tu­gal's 10year yield rose to a six-month high this week, the coun­try auc­tioned trea­sury bills at neg­a­tive yields on Wed­nes­day and sold 4 bil­lion euros of 10-year se­cu­ri­ties last week.

The govern­ment on Thurs­day fore­cast growth will ac­cel­er­ate to 2.1 per­cent this year and an­nounced a nar­rower tar­get for its 2016 bud­get deficit. Debt will de­cline 2.7 per­cent­age points to 126 per­cent of gross do­mes­tic prod­uct at the end of 2016. "We have a strong com­mit­ment to re­duce our debt," Cabral said in the in­ter­view. "We're go­ing to have stronger growth, in line with in­creas­ing growth in Europe."

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