Spain 
Italy 
Greece 
NPL Platform May Take on Novo Banco’s Portfolio of Bad Debts
11 April 2018
The Resolution Fund will have a say on decisions regarding CGD, BCP and Novo Banco’s credit management platform through its contingent capitalisation mechanism. There is no limit to the transfers of covered assets.
Novo Banco’s bad debts, which are being protected by the contingent capital mechanism, and which may dictate injections by the Resolution Fund, may have their management transferred to the NPL platform. Novo Banco will propose which credits will be negotiated by the platform, even if they are included in the mechanism. In other words, the Resolution Fund may be called upon to cover possible losses on sales or loan restructurings that may be agreed upon under the platform.
Novo Banco’s contingent capitalisation mechanism is based on all the credits that are under its purview, a total of 5.4 billion euros as of December 2017 (net value, not including impairments).
The bank’s management of these assets complies with its internal rules and, therefore, the institution may consider that it makes sense that the management of certain loans under the mechanism could be overseen by the platform that it set up with the Caixa Geral de Depósitos and the Banco Comercial Português. The platform, called the PNCB, will manage defaulted loans that are common to at least two of the three banks.
The Resolution Fund can thus address the proposed solutions to the loans transferred to the platform. This is because the Resolution Fund, an entity financed by the contributions of the banks and working with the Bank of Portugal, will always have a final say of transactions covered by Novo Banco’s mechanism: whether they are portfolio sales or restructuring. The mechanism’s monitoring committee, led by José Rodrigues de Jesus, can also weigh in on proposals.
The Fund can inject €3.89 billion to cover losses on those assets if there is deterioration of Novo Banco’s ratios below a predefined threshold and a devaluation in the value of the assets. An injection may result from a proposal by the NPL platform.
Neither the banks nor the platform’s management wanted to comment.
The platform was constituted by agreement between the three banks with the highest levels of bad debts. The aim is to jointly negotiate outstanding loans that the banks have in common to speed up the rescheduling of debts.
Although the debts will be managed separately, the loans will continue to be included in the respective banks’ balance sheets. In the initial stage, the transfer of loans to the platform, which must be authorised by the debtors themselves, must exceed €5 million vis-à-vis each creditor bank.
PNCB: the Integrated Bank Credit Trading Platform
PNCB – the Integrated Bank Credit Trading Platform for is the name of the complementary group of companies (ACE) constituted by CGD, BCP and Novo Banco to manage the negotiation of credits that are common to at least two of the banks. José Manuel Correia, general director of Paulo Duarte, heads the executive board of PNCB, with three more members, in which the three banks are represented. Headquartered in CGD’s building, the platform is intended to function for a period of three years. However, this period is renewable, as the platform’s work is not expected to be finished within that timeframe.
Original Story: Jornal de Negócios – Diogo Cavaleiro
Photo: Miguel Baltazar
Translation: Richard Turner