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Solution to credit problem

By Chris Graeme [email protected]

The President of Banco Espírito Santo Investimento says that the way to return credit to the economy is by widening the timeframe for deleveraging.

Deleveraging is when a bank effectively offloads its risky debts and starts recapitalising its capital ratios through bank charges, savings and other sources and lending less money out to private and public entities.  

In an interview over the weekend with Diário Economico, José Maria Ricciardi said it was all too easy to “bash the banks” which was an excuse to cover a lot of incompetence.

Ricciardi argues that the only way to refinance public and private companies and the economy is to renegotiate with the ‘Troika’.

But this could mean reneging on the strict timetable rules that the Troika set down in the spring.

He said that he did not believe that the Government would not need additional funds for public companies. “I don’t see how that’s possible?”.

“I think the way out of the problems these public entities are suffering is for Portugal to be so compliant and disciplined in the programme that it is implementing – unfortunately resulting in difficult social consequences – in order to gain sufficient credibility to renegotiate the package that had already been negotiated,” he said.

By this he meant widening the timeframes set down by the ‘Troika’ as well as renegotiating some extra cash to keep public companies afloat.

The banker slammed criticism of his sector by saying that “having a go at the banks might be a politically convenient thing to do in speeches” but didn’t “cover up political incompetence.”

“Portuguese banks have to deleverage their books by 2014 at the same time they are being called upon to lend money to public companies and recapitalise. How on earth can you do that and lend money to the real economy? How can we as bankers be expected to pull rabbits out of hats?”

Ricciardi said that as much as people loved to hate the banks, the banks had “absolutely no responsibility” for the situation the country had arrived at. In Ireland the banks were to blame in some measure, but in Portugal the opposite was true.

“It is the banks that are suffering slashes in their ratings because of the fall in the ratings of the Portuguese Republic,” he said, adding that if some of the Portuguese banks were “in another republic, they would have a better rating.”

“In any part of the world the banking system is at the heart of the economy. If it weren’t for the banks the economy wouldn’t be financed,” he argued.

The president of BESI also said that merging banks at the present time “wouldn’t solve anything” and would be “harmful to competition.”

He also left a clear message: Portugal’s banking system needed to go international. “We need to beef up our presence in places where there is added value, such as Latin America, Africa and even Asia where we have had traditional ties,” he said.

“Portugal has an advantage of having had relations for ages with many important countries worldwide,” he added.

José Maria Ricciardi also said it was too early to say if the recapitalisation of some banks put the banking sector in Portugal at risk of nationalisation or State control.

“The rules and regulations governing this recapitalisation (from the ‘Troika’ funds) for the banks have not yet been issued. While tax payers’ monies are in these banks, there will be no distribution of dividends and bonuses for managers. We’ll have to wait and see what happens,” he said.