{"id":16481,"date":"2016-01-14T15:20:23","date_gmt":"2016-01-14T20:20:23","guid":{"rendered":"http:\/\/olduvai.ca\/?p=16481"},"modified":"2016-01-14T15:20:23","modified_gmt":"2016-01-14T20:20:23","slug":"creditors-accuse-portugal-of-unfair-populist-short-cut-in-e2-billion-bank-bail-in","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=16481","title":{"rendered":"Creditors Accuse Portugal Of “Unfair, Populist Short-Cut” In \u20ac2 Billion Bank Bail-In"},"content":{"rendered":"

Creditors Accuse Portugal Of “Unfair, Populist Short-Cut” In \u20ac2 Billion Bank Bail-In<\/a><\/h3>\n

Two weeks ago, The Bank of Portugal shocked markets by\u00a0bailing in<\/a>\u00a0senior Novo Banco bondholders.<\/p>\n

\n
\n

Novo Banco was the \u201cgood\u201d bank forged from the ashes of Banco Espirito Santo which had to be bailed out by the state in August of 2014. The idea was to sell Novo Banco to pay for the cost of the bailout, but the auction process eventually floundered amid turmoil in Chinese markets (at least two of the potential bidders were Chinese) and uncertainty about whether this \u201cgood\u201d bank would in fact need more capital given the elevated level of NPLs already on its books.<\/p>\n

In November, the ECB told Novo it woudl indeed need to raise some \u20ac1.4 billion in fresh capital which the bank initially said would come from asset sales.\u00a0A little over a month later, Portugal\u2019s central bank essentially just gave up.<\/strong>\u00a0On December 29, the bank announced it was transferring \u20ac2 billion in NB senior notes back to Banco Espirito Santo which, like a ghost skyscraper in China, is set for demolition.<\/p>\n

In other words,\u00a0Novo Banco plugged the \u20ac1.4 billion hole by essentially declaring \u20ac2 billion in bonds null and void.\u00a0<\/strong><\/p>\n