LISBON (Reuters) - Portugal has reached an agreement with JP Morgan (JPM.N) in a row over costly interest rate hedging contracts sold to state companies, the finance ministry said on Wednesday.
The dispute, during which both sides threatened legal action at one point, stems from complex hedging products sold by various banks to companies such as the Lisbon and Porto metro operators. The government has been trying to stem losses of up to 3 billion euros from these deals.
The government entered into talks with JP Morgan over the dispute and said in a statement on Wednesday that it could “confirm that the negotiating process was concluded last week.”
The contracts between JP Morgan and public sector companies have now been closed and relations with the bank have been “normalized,” it said.
The row had echoes of similar battles in countries such as Italy where bank clients said they were missold products.
Portuguese treasury secretary Maria Luiz Albuquerque said in April the government had managed to renegotiate interest rate swap contracts containing “highly speculative elements” with some banks, cutting by 20 percent the potential liabilities from swaps that could total 3 billion euros.
Separately Portugal said on Tuesday it had appointed JP Morgan as financial adviser for the planned privatization of the national postal service.
Reporting By Axel Bugge; Editing by Greg Mahlich