LISBON, Sept 29 (Reuters) - The Portuguese state is changing the terms on a total 4.25 billion euros in loans to the bank resolution fund and their exact extension is still being defined in order for banks not to increase their payments to the fund, the finance ministry said.
The fund is formally owned by Portugal's banks which pay interest on the loan, and potential additional losses by banks from the fund have exacerbated investor concerns about Portugal's banking system, which is still reeling from two rescues of lenders in 2014 and 2015.
The ministry, which first announced the plan on Wednesday, said changes to the terms should reduce uncertainty over the yearly responsibilities of the banks in the future, regardless of the contingencies that may arise for the fund.
The amount is comprised of 3.9 billion euros the fund received from the government for the 4.9-billion-euro rescue of indebted Banco Espirito Santo (BES) in 2014 and 350 million euros used by the fund in the resolution of the smaller Madeira-based bank Banif in December 2015.
"The new loan maturity is still being determined via ongoing technical work, but it will be what is required to amortize 4.25 billion euros in debt with an interest rate to be applied while maintaining the banks' contributions at the same level," a ministry spokeswoman said.
The current loan for BES matures in December 2017, and the Banif loan is until end-2020.
The new loan could carry an interest rate equal to the state's financing costs for two or five years plus a spread to cover administrative costs, the spokeswoman said. The precise new terms have not yet been agreed with the resolution fund.
China's Fosun has offered to take a large stake in Portugal's largest listed bank Millennium bcp, which should shore up its capital, but only on the condition that the bank will not have to make any additional payments to the fund.
The state is still desperately trying to sell the "good bank" Novo Banco, which was carved out of BES, to recover its loans. Failure to sell Novo Banco has hung over Portugal's banking sector because banks would have to fill any possible shortfall in the sales price of Novo Banco. (Reporting By Sergio Gonaclves, writing by Andrei Khalip)