Standard & Poor’s says Novo Banco victim of political games

A senior director at the US ratings agency Standard & Poor’s says that Portuguese bank Novo Banco is being used in a game of politics in which the opposition PSD party is trying to score points against the government and hold them to account.

Frank Gill told the online news service ECO that the Portuguese parliament’s decision in a vote by a ‘negative’ coalition to block a transfer of funds to the bank should not affect Portugal’s rating since its banking system is protected by overseas shareholders.

“Novo Banco is a weight around the neck for any government to bear, because it is a very expensive contingent obligation,” he said.

At issue is a motion from the left-wing Bloco de Esquerda to block the release of a set amount defined by the government for Resolution Fund financial assets which the fund injects into Novo Banco.

The block was approved by a coalition of small parties (PCP, PEV, BE, Chega, Joacine Katar Moreira) and the main opposition party PSD with abstentions from PAN and the CDS.

The government argues that this decision to block the cash transfer has broken the contract signed by US fund Lone Star and the State when the bank was sold to the former in 2017 because it violates article 105 of the Constitution and the Budgetary Framework Law.

Nevertheless, the Minister of Finance, João Leão, says he is studying different alternatives within the framework of the current State Budget.

Frank Gill has played down the parliamentary decision. “If the opposition were in power, I suspect that the same thing would have happened, but with different parties. I think that the opposition did this because it provided a political opportunity to make life difficult for the government.”

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