Thursday, 16 June 2011

The IMF/EU/ECB bailout for Portugal: Banking Sector Reform

The IMF/EU/BCE banking sector reforms are aimed at enhancing the resilience of the banking sector “by increasing capital requirements through market-based solutions, supported by a fully funded capital backstop facility. Safeguards to help ensure adequate banking system liquidity are strengthened. ”

The key measures include: a) require banks to raise their core Tier 1 capital to 9 percent by end-2011 and 10 percent at the latest by end-2012. Banks are supposed to raise the necessary capital through the market, with the exception of CGD which will raise the money by shedding assets (mostly its insurance business). The Government will also set up a contingent cash facility of €12 billion to rescue banks in trouble; b) increase by €15 billion (to €35 billion) the Government guarantee fund for bank bond issues which can be used for ECB refinancing; c) bring the BPN case to a close; and d) improve the Central Bank supervision system as well as the Deposit Insurance mechanism.

Since the Portuguese banks were not exposed to the sub-prime crisis or to a real estate bubble, the measures seem enough to maintain the sector for about two years until it can access the wholesale market again. However, should the Portuguese sovereign debt crisis continue beyond that or should a restructuring take place before that then new measures will be needed.

Yet the program can be considered to be a missed opportunity to force a much needed streamlining and change of the business model of the Portuguese banks. These have been plagued by a chronic lack of capital (tolerated by the authorities) which was used to preserve the control of the banks in the hands of a few insiders; while disguising a low profitability in a cozy government protected market. Moreover, some of the banks have a dangerous maturity mismatch caused by a low deposit base and a high exposure to long term loans to the mortgage sector, PPPs, utilities and some equity stakes.

In order to avoid that banks carry out their deleveraging mainly through a reduction of credit to the non-state-owned corporate sector and the household sector, with major social and macro-economic consequences, the banks should be forced to change their traditional business model.

For instance, this could be easily achieved by limiting their equity stakes in public companies (contributing to provide liquidity to the stock market and reduce the many incestuous relations). Likewise the Government should recapitalize adequately the surviving state-owned enterprises to reduce the banks’ exposure to that sector. Most importantly, the Government should nationalize the PPPs to remove them from the banks’ balance sheet. This should be financed by a long-term loan from the EU EFSF/ESM.

In conclusion, the authorities need to be more creative because the success of the financial sector reform and fiscal stabilization are inextricably intertwined for the good and the bad.


    Do you need Loan to pay off your debt and start a new life? You have come to the right place were you can get FUNDED at a very low interest rate. Interested people/company should please contact us via email for more details.

    Full name:
    Date of birth (yyyy-mm-dd):
    Marital status:
    Amount Needed:
    Zip/postal code:
    Phone number:
    Monthly Income:


  2. Hello Everybody,
    My name is Mrs Sharon Sim. I live in Singapore and i am a happy woman today? and i told my self that any lender that rescue my family from our poor situation, i will refer any person that is looking for loan to him, he gave me happiness to me and my family, i was in need of a loan of S$250,000.00 to start my life all over as i am a single mother with 3 kids I met this honest and GOD fearing man loan lender that help me with a loan of S$250,000.00 SG. Dollar, he is a GOD fearing man, if you are in need of loan and you will pay back the loan please contact him tell him that is Mrs Sharon, that refer you to him. contact Dr Purva Pius,via email:( Thank you.


    1. Name Of Applicant in Full:……..
    2. Telephone Numbers:……….
    3. Address and Location:…….
    4. Amount in request………..
    5. Repayment Period:………..
    6. Purpose Of Loan………….
    7. country…………………
    8. phone…………………..
    9. occupation………………
    11.Monthly Income…………..

    Email Kindly Contact:


  3. Invest with 200$ and get a returns of 5,000$ within seven business working days.

    Why wasting your precious time online looking for a loan? When there is an opportunity for you to invest with 200$ and get a returns of 5,000$ within seven business working days. Contact us now for more information if interested on how you can earn big with just little amount. This is all about investing into Crude Oil and Gas Business.


  4. ¿Es usted un hombre de negocios o una mujer? ¿Necesita dinero para iniciar su propio negocio? ¿Necesita préstamo para liquidar su deuda o pagar sus facturas o iniciar un buen negocio? ¿Necesita dinero para su proyecto? Ofrecemos préstamos garantizados de cualquier cantidad y en cualquier lugar en el mundo (valor individuos, empresas, bienes inmuebles y personas jurídicas) en nuestro ritmo de 3% excelente. Para las respuestas de solicitud y enviar más información a la dirección de correo electrónico Siguientes

  5. Are you in need of a loan? Do you want to pay off your bills? Do you want to be financially stable? All you have to do is to contact us for more information on how to get started and get the loan you desire. This offer is open to all that will be able to repay back in due time. Note-that repayment time frame is negotiable and at interest rate of 3% just email us

  6. I live in USA Florida and i am a happy woman today? I told my self that any Loan lender that could change my Life and that of my family, i will refer any person that is looking for loan to Them. If you are in need of loan and you are 100% sure to pay back the loan please contact them and please tell them that Mr Alfred Kessinger, Lynn referred you to them.

  7. My name is powell williams

    I am a business loan lenders give loans to people who
    they need the confidence that you can repay the loan and give credit to the
    Loans rental,
    car loans,
    business loans,
    Educational loans
    construction loans,
    commercial mortgage,

    Please e-mail:

    I do not know if you need a loan, if you are interested
    contact me now on +17274319876