Portuguese banks turn to bailout fund

LISBON: Three leading Portuguese banks said they would draw on funds provided under the country’s 78 billion-euro international bailout to meet tough new capital requirements as they struggle with the country’s debt crisis.

Millennium bcp, Portugal’s largest private bank in terms of assets, said it would draw 3 billion euros from the bailout fund’s “recapitalisation line” while Banco BPI would draw 1.2 billion euros. State-owned Caixa Geral de Depositos will draw 1.65 billion euros.

The move by the three banks was expected and leaves only Banco Espirito Santo among Portugal’s leading banks without state funding. BES had said it did not intend to draw on state funding.

Under Portugal’s bailout from the European Union and International Monetary Fund, 12 billion euros was set aside for the recapitalisation of its banks.

“The participating banks will be among the best capitalised in Europe,” the finance ministry said in a statement. “In this way they will be well positioned to continue to ensure access to credit to the Portuguese economy.”

Portugal’s banks have effectively been cut off from European capital markets for nearly two years since the country entered its worst recession since the 1970s under the weight of sweeping austerity measures.

Under Portugal’s bailout terms, the country’s banks need to have core Tier-1 capital ratios of 10% of assets by the end of this year. — Reuters