LISBON, Sept 20 Portuguese banks will end this
year more capitalised and in better shape than a year ago, which
will allow them to decide whether they want to set up a vehicle
for bad loans to clean up the banking system, the treasury
secretary said on Tuesday.
"We believe that at the end of this year we will have a
banking system in a much healthier situation, way better than a
year ago," Ricardo Mourinho Felix told reporters.
"Starting from there, it will also be up to the banks to
decide how to proceed with cleaning up non-performing assets.
"The creation of a vehicle could be a more efficient way of
recovering those assets as it allows to use synergies, to reduce
fixed costs," he added.
Portugal is still reeling from two bank rescues in 2014 and
2015 that have undermined investor confidence.
Sentiment has improved slightly since the government last
month negotiated a recapitalisation -- on market terms -- of
ailing state-owned bank Caixa Geral de Depositos, which is mired
in bad loans.
With investors worried about an economic slowdown and
Portugal's ability to meet its European fiscal goals, however,
entrenched doubts about the health of the banking sector have
contributed to a recent sharp rise in Portuguese bond yields.
The Bank of Portugal has long advocated a common mechanism
that would allow banks to offload bad loans and unprofitable
assets, preferably following the Italian model for a bailout
fund that acts like a backstop investor in weaker banks. But it
has said the plan faces many European-level restrictions.
"Joining this vehicle has to be something that banks
consider useful, not something that is forced or imposed on
them," Mourinho Felix said.
(Reporting by Daniel Alvarenga; Writing by Andrei Khalip;
Editing by Catherine Evans)