D-Day in race for ‘good bank’

On the face of it, Portugal’s New Year could hardly have started better. We are being told to expect “even more tourists” than ever before (and the sector is already booming). Foreign investment is up (with numerous major-league companies consolidating operations on national soil). The prospect of Tesla siting its first European ‘giga factory’ here is still being floated while international press stories are buoyant. The Financial Times even suggests “other European leaders can only dream” of the popularity currently enjoyed by our government of ‘adventurers’ who seized power so dramatically just over a year ago. But there is one massive elephant in the room. A disaster so huge that no one seems prepared to acknowledge it.

Every day for weeks we have been assailed by stories predicting the outcome of the ‘sale of the good bank’ Novo Banco.

Even this week, we were being assured that ‘final decisions’ on who will be chosen to run it will be made on Wednesday.

But, true to form, on Wednesday came the ‘shock’ revelations that new bidders were about to enter the race at the last minute, ‘vulture fund’ managers were descending on Lisbon to “force” the Bank of Portugal into deciding their way – and Finance Minister Mário Centeno was saying that, actually, all scenarios were open, even nationalisation.

Considering that former government minister Sérgio Monteiro is earning €25,400 a month to oversee what can only be a “ruinous” sale (as none of the contenders are prepared to touch the original price tag of €4.9 billion) – and his contract has just been extended by up to six months (says Jornal de Negocios) – prospects for D-Day as we went to press were distinctly muddled.

But if Novo Banco’s woes are bad – remember, it was originally due to be sold by 2015, and this is the second attempt to do so – just take a look at what is going on at State Bank CGD.

According to national tabloid Correio da Manhã, incoming new boss Paulo Macedo can’t hope to take over till the end of the month, while outgoing administrator António Domingues – the man who refused to comply with public service rules of asset disclosure – is loathe to hold the fort, apparently texting Mário Centeno over the government’s terms for him to do so with curt ripostes like “inadequate, and completely unacceptable”.

Perhaps the greatest fault here lies with a national press that simply appears to repeat everything, without thinking ahead about consequences.

On Wednesday, for example, Público gave a page to former Bloco de Esquerda leader Francisco Louçã who has apparently written to the government asking them to “keep Novo Banco” in the State as all contenders would be ‘bad’.

Louçã spared no criticism on the potential buyers left in the race, calling them ‘freebooters’ and ‘proven chancers on the high seas of world finance’.

Little, surprisingly, is being mentioned of the man at the centre of this hideous mess: governor of the Bank of Portugal, Carlos Costa – most usually photographed grave-faced with at least one hand supporting his head.

Dubbed Mr Magoo not long ago by Louçã’s successor Catarina Martins, the description of the legendary character given by Wikipedia would appear to be almost tailor-made: “A wealthy short-statured retiree who gets into a series of comical situations as a result of his nearsightedness, compounded by his stubborn refusal to admit the problem.”

But the same could be said of Mário Centeno (leaving out the retiree part) – so perhaps Portugal has two Mr Magoos to contend with this New Year?

What does seem certain is that very little will be decided on so-called “D-Day”, and whatever does happen will do nothing to help the (minutely recovering) deficit.

In fact, one opinion article in Sol this week suggests that a New Year news story on the deficit reducing in November, could be a sop for news that it is about to get a whole lot worse.

Legal bid to block sale

Meantime – and conveniently being ignored by national press this week – a new legal bid to block the sale of Novo Banco, in the event of any contenders winning through, has been lodged at Lisbon’s administrative court by lawyers representing 232 ‘small investors’, including emigrés who were not party to deals announced earlier this month.

The embargo attempt means to be a “real test of Portuguese justice”.

Representing the investors, lawyer Miguel Reis told Público that “if the sale is allowed there is no justice” and the State “will end up paying much more than it would have paid if Novo Banco was delivered to its creditors, through privatisation”.

Público does explain, however, that “if the bank has not been bought or nationalised by August 2017” liquidation could save taxpayers a great deal of grief.

It could trigger “a systemic crisis”, writes journalist Cristina Ferreira “but the measure would not have repercussions on the deficit” and, “in theory”, it could “protect Portuguese taxpayers”.

Ferreira’s text was published last week, and on Wednesday, no-one was referring to liquidation, but as Mário Centeno blithely told Diário de Notícias/TSF radio, “nothing is out of the question when it comes to dealing with the guarantee of stability of the financial system”.

With the current drip-feed reporting of government thinking, it wouldn’t take too much of an adventurer, or indeed chancer, to set about massaging the idea of ‘nationalisation’ into a scenario of liquidation ‘to protect the deficit’.

Only time will tell – but that leaves the question: “who will end up footing the bill for the billions ploughed into Novo Banco?”.


Since writing this story, the Bank of Portugal has announced that American venture capitalists Lone Star Funds are “best placed” among the reduced field of bidders “to conclude talks on the purchase of Novo Banco SA”.

A “new phase of talks” does not exclude the possibility of other potential bidders improving their proposals, reports Bloomberg, hours after international news agency Reuters wrote that “Portugal is not ready now to complete the sale of Novo Banco”.

During the upcoming talks, an attempt will be made to minimize the potential impact on government finances that may result from Lone Star’s current proposal, said the Bank of Portugal.

By NATASHA DONN [email protected]

Photo: Governor of the Bank of Portugal, Carlos Costa, has been dubbed Mr Magoo by the leader of the Left Bloc, Catarina Martins