Leaving the idea of creation of a “bad bank”, the Portuguese Government proposes to create a centralization project to manage loans of several banking bodies.

The first version of this proposal was presented by the Prime Minister António Costa, whom announced on the 7th June that «the Government presented already a proposal for the nonperforming loans to the three Portuguese Banks with higher levels of these type of loans in default», among which CGD, BCP and Novo Banco, and that its welcomed by the bankers, according to the newspaper Negócios. It’s expected a structure to centralize the management of the nonperforming loans, in which the Banks entrust the negotiation with potential buyers. Thus, the restructuring processes can be accelerated and it’s also possible to increase the bargaining power of the credit seller, saving costs, since there's only one single interlocutor.

This proposal foresees the definition of criteria that determine which credits may have a management entrusted to this new centralized structure. It will concern sustainable funding to companies, or that may show ability to recover.

Banks agree with this proposal, instead of a solution where the nonperforming loans leave their balance sheet for a value inferior to the balance value. This would demand for capital injections. They will now work along with the Government to define the details of this new measure.

This idea comes at a time when the Portuguese banking sector has around €30 000 M NPL (non-performing loan) in its balance, some of which already provisioned, including real estate, assets turned into funds, great debtors and SMEs credits, depending on the banking institution, according to the ECO.