LISBON: The governor of the Bank of Portugal wants an exception from the European rules so Portugal can create a mechanism to “clean” bad debts without banks having to go through a profound restructuring process. Governor wants to clean banks’ bad debts.
We not only need to find a mechanism to secure these assets [non-performing credit and mortgages] (…) but also a waiver that lets us intervene in this area without threatening banks with a dangerous mechanism like the resolution directive”, Carlos Costa said on Tuesday at a banking conference in Lisbon.
The top banker said that apart from the specific problems of each bank, there was a “systemic problem” in Portuguese banks: the “assets that are not generating income, either non-performing loans or real estate assets” that the banks receive from clients who cannot keep up the payment of their loans.
“It is fundamental that the banks can get rid of these assets”, he said, adding that this implies the creation of a mechanism just like in other countries such as Italy, “based on a series of guarantees and counter-guarantees that minimise the impact for the banks” that participate in the mechanism.
Mr Costa regretted that Portugal had not been able to create a “bad bank” back in 2011 to accommodate the banks’ problem assets as happened in Ireland and Spain, but such a vehicle would have had a severe impact on the public accounts that it was unfeasible at that time.
