Estimated read time: 1-2 minutes
This archived news story is available only for your personal, non-commercial use. Information in the story may be outdated or superseded by additional information. Reading or replaying the story in its archived form does not constitute a republication of the story.
LISBON, Portugal (AP) — Portugal is having trouble selling Novo Banco, the so-called good bank salvaged from last year's collapse of major lender Banco Espirito Santo.
The country's central bank said Tuesday it had missed its own Aug. 31 deadline for the sale after failing to reach agreement with a potential buyer, which it didn't identify.
The central bank said in a statement it was starting talks with another bidder, also unnamed. It said a third bid remains on the table.
Novo Banco received 4.9 billion euros ($5.5 billion) from a so-called bank resolution fund, a mechanism adopted during the eurozone debt crisis to support the financial sector. The Portuguese Treasury provided 3.9 billion euros of that, with other Portuguese banks providing the rest. Now, those lenders want to recoup their money.
If the Treasury isn't fully refunded, its losses could be added to Portugal's budget deficit — a sensitive political issue as the country struggles to reduce its government debt. Also, the center-right government, which is seeking re-election in a ballot next month, promised that Novo Banco wouldn't cost taxpayers a penny, but a repayment shortfall would have to come out of public funds and would embarrass the prime minister.
Furthermore, failure to recover the loan would dent the balance sheets of struggling Portuguese banks, which have to submit to European stress tests that gauge their financial health.
Novo Banco is being sued at home and abroad by people and companies that lost money in the collapse of Banco Espirito Santo, then Portugal's biggest private bank. Analysts say uncertainty about the outcome of those court cases makes it hard to persuade bidders to risk their money on Novo Banco.
Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
