The Resolution Fund (FdR) said on Tuesday that it carried out a “careful and rigorous scrutiny” of the operations that Novo Banco presented to it, ensuring that it did not authorize “one in four” asset sales operations.
Those who bought assets from Novo Banco made a profit of 60% or more (and the taxpayer footed the bill)
In a statement, the day that the Court of Auditors (TdC) released an audit in which it criticized the entity’s performance, the FdR guaranteed that “effectively safeguarded the public interest” and promoted the “minimization of the use of public resources”not only through “the contractual mechanisms agreed within the framework of the sale of Novo Banco, but also with “effective public control, in particular through the action of the Resolution Fund in the execution of the agreements”.
According to the audit report, no “evidence of a systematic exercise” by the FdR of law, enshrined in the ACC [Acordo de Capitalização Contingente]to “directly or through ‘an independent accountant’, analyze NB’s accounts, including ‘impairment losses’”.
In the same statement, the FdR does not agree with this analysis, highlighting “the careful and rigorous scrutiny what […] carries out the operations presented by Novo Banco” and the “analysis of said operations in light of the criteria of minimization of losses, which in fact includes a comparison with credible and viable alternatives for the recovery of assets”.
The entity also highlighted its opposition to “the execution of operations, provided that it is inferred from that analysis that it is not demonstrated that the operation minimizes losses —and that, in the case of asset sale operations, it results in one of each four operations proposed by Novo Banco and in opposition to credit sales for an amount close to two billion euros”.
The FdR also gave several examples of its actions, including its opposition “to carrying out portfolio sales operations in 2020, based on the assessment that, given the economic effects caused by the pandemic and the significant uncertainty that was experienced then, the market conditions would not be adequate. conducive to maximizing value” and “intervention in the sale process of the insurance company GNB — Companhia de Seguros de Vida, SA (“GNB-Vida”) in order to avoid, as was avoided, that the operation of sale would have been made at a more unfavorable price.
In addition, the entity reported on the “proactive action of the Government, the Bank of Portugal and the Resolution Fund in the recovery of an important loan from Novo Banco, which has already brought an estimated benefit of 11 million euros for the Resolution Fund . , which can still be increased significantly” and the “timely intervention to prevent the costs incurred by Novo Banco with the attribution of variable remuneration to the members of its Executive Board of Directors from being passed on to the Resolution Fund”.
According to the FdR, “these facts —and several others of a relevant nature— were not duly considered in the analysis of the Court of Auditors”.
“Although its objective is to assess whether the use of the financing from the Resolution Fund has been minimized, the Court of Auditors’ audit does not present or quantify any alternative scenario in which, given the specific circumstances, said financing could have been less” , he highlighted, indicating that “it was not even considered in the audit that, on the contrary,” “it was not the action of the Resolution Fund, and the amounts paid by it could have been significantly higher.”
According to the Fund, until December 31 of last year, “the losses attributed to the portfolio of assets subject to the Contingent Capitalization Agreement amount to 4,408 million euros”, being “the value of the payments made by the Resolution Fund of 3,405 million euros, a value of around one billion euros less than the losses covered by the scope of application of the Agreement and which corresponds to around 77% of the aggregate value of these losses”.
“In addition, the amount already claimed by Novo Banco under the Contingent Capitalization Agreement, in aggregate terms, exceeds the maximum limit of 3,890 million euros, with the amounts paid being less than said maximum limit by 485 million euros, for the action and intervention of the Resolution Fund”, highlighted the entity.
Regarding the recommendations of the TdC, the FdR reaffirms “its commitment to give them an adequate reception, always respecting their scope of legal and contractual competences”, highlighting that, “in this sense, the Resolution Fund informs that they have already been fully recommendations of the previous audit carried out by the Court of Auditors, whose acceptance was within his reach, having replaced his “external auditor” and hired, “for this purpose, BDO & Associados, SROC, Lda”, as well as “selected a new entity to perform functions as Verification Agent, under the terms of the Contingent Capitalization Agreement”.
Source: Observadora
