A television report suggesting that the Portuguese government is about to bailout Madeira’s Banif Bank has led to historic losses on the stock exchange and ominous rumblings from ratings agency Standard & Poor’s.
The true situation still remains fuzzy, with the government finessing the issue in a bid to say everything is under control, Banif in apparent denial and national media stressing this is “a race against time”.
The problem – along with the €800 million or so of public money tied up in Banif – is that on January 1 European rules will be changing so that in situations where banks collapse it will be the major shareholders who have to assume losses.
In this case, where the Portuguese government holds a 70% stake in Banif, the fallout could be colossal.
According to TVI24 – the station that leaked the news last night (Sunday) – the government is already preparing a “medida de resolução” (takeover) which would see Banif carved up into now familiar terms: a good bank and a bad bank.
TVI claims the government could then try and sell the good part of the bank or merge Banif into State bank CGD – a solution which PM António Costa is said to like but which has been “vetoed” by Brussels.
“Nerves, lots of nerves” is how Económico website introduced today’s situation which has seen at least 35% knocked off the value of Banif shares, while elsewhere – with what Económico terms “the bad atmosphere in Europe” – other markets are also being affected.
Nationally, Standard and Poor’s have put the boot in suggesting they will cut Portugal’s rating if the new government “deviates significantly from economic policies” already in place.
Reuters has suggested an example of deviation could be the suspension of any further “structural reforms”.
In the meantime, a statement from Banif – the headquarters of which are in Funchal, Madeira – has hit out at the “elevated number of news stories … without concrete reference to respective sources that have been the origin of the extreme volatility of its shares”, writes Económico, stressing three major investment funds are now being invited to present their ‘offers’ to buy up the bank before the end of the week.
One of these funds is understood to be North American group Apollo – one of the contenders short-listed to buy Novo Banco before the Bank of Portugal pulled the whole deal, hoping to reintroduce it next year with a better chance of reaching its reserve price.