In view of the recent news on Banco de Portugal’s performance regarding Banif, the Governor clarifies that:

1. Banif, similarly to three other banks, has been object of public capitalisation. The involvement of public funds implies that capitalisation must be approved by the European Commission. That approval has required a restructuring plan of Banif to be submitted by the Portuguese State.
 
2. The preparation of Banif’s restructuring plan is the responsibility of the respective Board of Directors and shareholders.

3. By July 2015, six restructuring plans had been submitted to the European Commission, none of which had been accepted.

4. On 24 July 2015, the European Commission decided to open an in-depth investigation process of the State aid to Banif [1].  In the wake of this decision, Banif prepared a new version of the restructuring plan, which was submitted to the European Commission on 18 September 2015.

5. In the absence of a restructuring plan of Banif approved by the European Commission, and considering the possibility that the State aid could be considered illegal, and therefore its reimbursement would be required, the shareholders and the Board of Directors of Banif have started the process for the sale of the institution.

6. On 19 December, the Ministry of Finance informed Banco de Portugal that it had not been possible to sell Banif’s assets and liabilities through a voluntary sale process, since all proposals submitted by potential buyers implied additional State aid. This, in turn, determined that the sale could only be made in the context of a resolution.

7. The model of the sale process was the result of negotiations between the Government, Banco de Portugal and the European Commission, which gave rise to several constraints, namely as regards the profile of potential buyers of Banif’s business.

8. For the purposes of applying a resolution tool, the evaluation of assets is carried out according to national and European rules which require the application of valuation parameters close to a settlement concept, i.e., consistent with a sale within a short time frame. As a result, the assets are evaluated at values significantly below those in the institution’s balance sheet. For this reason, the resolution tool requires additional funds to finance the operation.

9. Public support requirements also reflect the valuation made by the buyers of Banif’s business, against the background of the sale conditions presently known, and also the decisions taken as regards the involvement of Banif’s creditors in the loss absorption effort.

10. In view of the existing circumstances and restrictions, the sale of the business of Banif in the framework of a resolution tool was the last resort solution that made it possible to safeguard the stability of the national financial system, and protect households’ and companies’ savings, as well as the financing to the economy.

11. Banco de Portugal acted in the context of its mandate and its powers, and stands ready to cooperate with the Parliamentary Committee of Inquiry to establish all facts.
 

[1] State aid — Portugal — State aid No SA.36123 (2015/C) (ex 2013/N) — Recapitalisation of Banif — Invitation to submit comments pursuant to Article 108(2) of the TFEU ( 1 ).
http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:C:2015:426:FULL&from=EN

 
Lisbon, 22 December 2015