(Adds quotes, details, bank shares rise)
By Andrei Khalip
LISBON, March 21 Portugal extended the
maturities on state loans to its bank resolution fund by nearly
three decades to 2046 to avoid imposing extra costs on a fragile
banking sector as the state looks set to sell rescued bank Novo
Banco at a loss to be borne by banks.
The extensions, from December 2017 and December 2020, on
over 4 billion euros ($4.3 billion) of loans will ensure that
banks keep paying what they currently pay in fund contributions,
without any increases, the finance ministry said in a statement.
Portugal injected 4.9 billion euros into Novo Banco in 2014
via the bank resolution fund, 3.9 billion of that sum being
state loans. In late 2015, the state had to rescue a smaller
bank, adding 350 million in loans to the fund.
The fund is the responsibility of all banks operating in
Portugal, and has to foot the bill for any difference between
the rescue funds and the selling price of Novo Banco. The state
has to offload the lender by an August deadline agreed with
The decision comes as the state is in the final stages of
negotiating to sell rescued bank Novo Banco to U.S. fund Lone
Star, which has offered to inject up to 1 billion euros into the
bank in return for a 75 percent stake, but with little or no
money to be paid to the state.
The first attempt to sell Novo Banco failed in 2015 as bids
came in far below the rescue amount, stirring investor concerns
about the already flagging banking sector's contributions to the
fund. But the government last year promised to change the terms
on the loans and has now delivered on its promise.
"The revision... allows to reduce uncertainty about banks'
annual payments (to the fund) in the future regardless of
contingencies that the resolution fund may have to bear," the
finance ministry said, adding that the measure had the green
light from the European Commission.
Shares in Portugal's largest listed bank Millennium bcp
jumped 4 percent after the announcement.
($1 = 0.9247 euros)
(Reporting By Andrei Khalip; Editing by Axel Bugge and Keith