Bank of Portugal agreed and conducted sale of Banif by resolution to Santander

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The prime minister says that the Bank of Portugal in December 2015, led by Carlos Costa, concluded that the sale of Banif by resolution to Santander was the only alternative to liquidation, and led the process.

This position was stated in António Costa’s answers to the 12 questions that were addressed to him by the PSD last November 23rd in order to clarify statements made by the former governor of the Bank of Portugal Carlos Costa, according to which there was a deliberate action on the part of the Government to precipitate the resolution of Banif.

In the document sent today to the Portuguese Parliament, António Costa answers the Social Democrats’ questions together — and not one by one — and attached 12 documents, including a statement from the Bank of Portugal, dated 20 December 2015, on the sale of Banif.

“Given the failure of the voluntary sale process, the Bank of Portugal, as Resolution Authority, concluded that the sale in the context of resolution was the only alternative to liquidation. The sale process in the context of resolution was thus conducted by the Bank of Portugal,” maintains the leader of the executive, before referring specifically to that statement from the institution then led by Carlos Costa when the sale in resolution to Santander Totta was announced.

“The Bank of Portugal considers that, given the circumstances and restrictions imposed, the sale of Banif’s activity is the solution that safeguards the stability of the national financial system and protects the savings of families and companies, as well as financing the economy,” António Costa emphasises, citing the national central bank’s statement of 20 December 2020.

The PSD has asked the Prime Minister whether he can confirm that on the morning of 14 December 2015 he sent a written communication to the President of the European Commission and the President of the European Central Bank stating that Banif Bank was in a resolution process and/or in a ‘pre-resolution phase.

The prime minister corrects the date of 14 December given by the PSD and assumes that “he addressed a letter to the president of the European Commission and the president of the European Central Bank (ECB)” — a letter that left his office to the Foreign Minister’s office on 15 December to be forwarded by diplomatic bag.

António Costa then alludes to disagreements in this process between the then finance minister, Maria Luís Albuquerque, and the governor of the Bank of Portugal, Carlos Costa, in November 2015 — a situation he says existed shortly before the first minority Socialist executive took office.

“In the scenario of total divergence exposed to the European Commission between the XX Government [the last of Pedro Passos Coelho] and the Bank of Portugal that existed in November 2015, the letter aimed to assure the European authorities of the Portuguese government’s determination to promote the stability of the financial system, dealing with all the situations already mentioned and not persisting in behaviors of postponement or denial in the face of the need for action, of which Banif was the most regrettable example,” responds the current Prime Minister.

In this item on Banif, the leader of the executive is now sending Parliament a letter from the European Commissioner for Competition, Margrethe Vestager, addressed to Maria Luís Albuquerque on 12 December 2014, urging the Portuguese government to present a credible restructuring plan for Banif by the end of March 2015 at the latest.

António Costa also accompanied his answers with a document revealing that on November 17, 2015, still under the Passos Coelho government, the Bank of Portugal found that Banif had “insufficient funds” and determined that credible measures to strengthen its capital would be presented within ten working days.

“The exchange of correspondence between the then governor of the Bank of Portugal and the minister Maria Luís Albuquerque shows a total and paralyzing divergence between the path proposed by the Bank of Portugal and that defended by the government,” he says.

On November 17, the current leader of the executive continues, citing documents, Carlos Costa wrote to Maria Luís Albuquerque alerting her “to the urgent need to reinforce Banif’s own funds” and requesting a public recapitalization solution and emphasizing that he may even have to propose a mandatory recapitalization measure.

Two days later, on November 19, Maria Luís Albuquerque “expresses surprise at the change of position of the governor, and defended by the European Commission, regarding the way forward for the bank.

Therefore, according to the Prime Minister, when his government took office, it was “three days before the deadline that the Bank of Portugal had set for Banif to increase its capital, the bank’s situation continued to deteriorate and there had been no understanding” between the Passos Coelho executive and the Bank of Portugal “on the way forward and the urgency was growing.

On January 1, 2016, “new European rules for bank resolution came into force that implied more onerous conditions for debt holders and, above all, for the institutions’ depositors.”

“Since it took office, in the few days available until the deadline for the sale process underway, the XXI Constitutional Government [the first Socialist minority] tested various solutions that made minimizing the potential cost to taxpayers compatible with a reorganization of the financial system,” emphasizes António Costa, who leaves yet another note, denying Carlos Costa’s version in the recent book “The Governor”.

“In the intense contacts with the European Commission, in which the Government and the Bank of Portugal were always involved, the Commission made some of these solutions [of voluntary sale] unfeasible in the context of the assessment of their compatibility with the State aid regime, namely by not allowing the integration of Banif in Caixa Geral de Depósitos (…) The voluntary sale process did not take place within the required timeframe, as it was shown that a sale that did not take place in a context of resolution was not feasible”, concludes the current leader of the executive.

António Costa does not answer the PSD’s question about “how he explains that TVI reported, at 10pm the night before the letter [to Brussels] was sent, information that coincided with what was included as content and that was presumably only known to him and his Government”.

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