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Financials

Novo Banco says meets capital requirements after bond transfer

LISBON, Dec 30 (Reuters) - Novo Banco, the ‘good bank’ carved out of the failed Banco Espirito Santo (BES), now meets the capital requirements of the European Central Bank after transferring a series of outstanding bonds back to BES, it said on Wednesday.

The transfer, which was approved by the Bank of Portugal on Tuesday, means that Novo Banco will have a phased-in common equity tier 1 capital ratio of about 13 percent, it said in a statement.

“Novo Banco is now in a condition to meet the capital requirements that resulted from the regulator’s recent comprehensive assessment stress test,” it said.

“Thanks to the transfer (of the bonds), Novo Banco will no longer be the debtor responsible for the bond issues, which will become part of BES’ balance sheet.”

Novo Banco was created in August 2014 after a 4.9 billion euro ($5.36 billion) rescue of BES. The collapsed bank’s good assets, such as deposits and branch network were transferred to Novo Banco, while old debts and liabilities were kept with BES, which is being wound down.

Last month the European Central Bank ordered Novo Banco to plug a 1.4 billion euro hole in its capital after it found that Novo Banco was one of nine banks to be short of capital in a follow-through on wider checks last year.

The Bank of Portugal said the transfer of the senior bonds would boost Novo Banco’s balance sheet by 1.985 billion euros.

The Bank of Portugal has been trying to sell Novo Banco, but the process was halted in September as the bids it received were seen as too low. The resolution of the capital shortfall represents the lifting of an important hurdle in the sale, which should resume in January. ($1 = 0.9148 euros) (Reporting by Axel Bugge, editing by Louise Heavens)

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