(Adds quotes, association positive on ECB stress tests)
By Sergio Goncalves
LISBON, Aug 6 (Reuters) - Portuguese banks will work together with the authorities for the swiftest sale of the new, healthy bank carved out of the troubled Banco Espirito Santo , the head of the Portuguese Banking Association (APB) said on Wednesday.
Fernando Faria de Oliveira told Reuters the intervention by the Bank of Portugal to rescue one of the country’s largest lenders that involved an injection of 4.9 billion euros mostly in state loans, was positive considering BES’s systemic importance.
As part of the plan, the state loaned 4.4 billion euros to Portugal’s bank resolution fund, which became the formal owner of the healthy new Novo Banco, while the “bad bank”, housing BES’s exposures to toxic assets, will be wound down.
In an emailed reply to questions by Reuters, Faria de Oliveira also said banks have proposed to make an additional contribution to reduce the state loan to 3.9 billion euros.
Portuguese banks finance the resolution fund that was set up in 2012 and had only a few hundred million euros - not enough to rescue BES. Now the fund has to sell the bank to investors to repay the state. The loan has an incremental interest rate designed to encourage its repayment soon.
“The associated banks and the association manifest their readiness to collaborate with the authorities, namely with the resolution fund, for the success of the adopted measures and the swiftest sale of shares in Novo Banco,” Faria de Oliveira said.
He added though that the banks had not been involved in the decision-making.
Concerns that banks may end up footing the rescue bill if they do not raise enough money for Novo Banco to repay the state in full hit their shares on Wednesday, causing the largest listed lender, Millennium bcp, to fall 15 percent.
But Faria de Oliveira was mostly upbeat on banks’ prospects, saying the additional contribution to the fund should come from their improving performance.
He said that now that BES’s insolvency has been avoided, the banking association expects the country’s banks to successfully pass the European Central Bank’s stress tests this year.
The ECB is putting the euro zone’s 131 largest banks through an unprecedented health check before it becomes their supervisor in November.
1 US dollar = 0.7472 euro Writing by Andrei Khalip, Editing by Louise Heavens and David Evans