Lisboa, 28 ago 2024 (Lusa) - The resolution of BES, in the ‘hot’ summer of the financial sector 10 years ago, has cost Portugal's coffers around €8 billion, but the accounts are still far from closed.
According to calculations made by Lusa, so far, the €8 billion bill is mainly the result of the initial capitalisation of Novo Banco (the transition bank created on the same day as the BES resolution) and the recapitalisations subsequently made by the Resolution Fund (FdR).
But the accounts are not complete: on the one hand, the FdR will have to pay BES's creditors and will have to take on any compensation decided by the courts. On the other hand, in the event of a sale of Novo Banco, the Resolution Fund and the state will directly receive part of the proceeds, which will be deducted from the state's costs of resolving BES.
The end of BES involved the creation of Novo Banco (to which assets considered ‘good’ and customer deposits were transferred), which was owned by the bank's Resolution Fund (FdR) (a public entity financed by contributions from banks) and capitalised by it with €4.9 billion.
However, as it didn't have enough money to capitalise Novo Banco, the FdR asked the public treasury for €3.9 billion, which it expects to repay over the long term (30 years).
In October 2017, 75% of Novo Banco was sold to the US investment fund Lone Star, which paid nothing (it injected €1 billion into Novo Banco) and agreed with the state on a contingent capital mechanism. Until 2026, and with a limit of €3.89 billion, the FdR would have to compensate the bank for losses in assets that jeopardised the capital ratios.
So far, Novo Banco has received around €3.5 billion under this mechanism. Of this amount, more than €2 billion came from state loans to the FdR.
With regard to BES's creditors, the law states that no creditor can bear greater losses in a resolution than they would in a liquidation (‘no creditor worse off’). In 2019, BES's liquidation committee recognised common claims worth €2.222 billion.
The consultancy Deloitte, at the request of the Bank of Portugal, concluded that BES's common creditors would recover 31.7% of their claims if the bank had gone into liquidation instead of resolution, so the FdR will have to assume this amount.
At the moment, hundreds of lawsuits are filed by investors against various organisations (Banco de Portugal, Novo Banco, the State, etc.). If the courts award damages, the Resolution Fund will be called upon to pay, which will increase the bill.
There are also costs associated with compensation mechanisms for the victims. The solution for the commercial paper victims cost around €267 million, borrowed from the state and which may never be fully reimbursed. Other solutions have been under negotiation with governments for years, especially for victims of the BES foreign branches and Banco Privée (Switzerland).
On the other hand, the Resolution Fund was recognised as a privileged creditor in the liquidation of BES, so it will receive €2.7 billion as a priority.
This means that the FdR will be left with all the assets of the ‘bad BES’ (i.e. there will be no money to pay the 5,000 ordinary and subordinated creditors). However, it will still be a long way from being reimbursed since BES's assets currently stand at around €175 million.
Currently, Lone Star owns 75% of Novo Banco, and the remaining 25% belongs directly to the FdR and the state. If Novo Banco is sold, the public purse will also receive part of the sale price. According to reports in June, the Resolution Fund values Novo Banco at more than €3.1 billion.
Faced with BES's serious financial situation in the summer of 2014, the alternative could have been liquidation.
The Bank of Portugal estimated that an unordered bankruptcy scenario for BES, such as immediate liquidation or bankruptcy, would have led the Deposit Guarantee Fund alone to spend between €9 and €18 billion to reimburse the deposits said to be guaranteed.
According to the European Commission document that approved the BES resolution, the orderly resolution of BES and the creation of Novo Banco was ‘the least costly option for Portugal’.
IM/ADB // ADB.
Lusa
