State aid: Commission approves Portuguese restructuring plan and support for sale of Novo Banco, completing 2014 resolution of Banco Espírito Santo

The European Commission has approved, under EU State aid rules, the Portuguese restructuring plan and support for sale of Novo Banco. The measures will allow the new private owner to launch its ambitious restructuring plan aimed at ensuring the long-term viability of the bank, while limiting distortions to competition. The sale of Novo Banco, concerned by today’s decision, completes the 2014 resolution of Banco Espírito Santo (BES). In August 2014, Portugal decided to put BES into resolution under the Portuguese resolution framework and determined the strategy for its resolution. To enable an orderly resolution, Portugal designed a number of support measures, including State aid for the transfer of certain BES assets to a bridge bank – Novo Banco. In this context, the Commission approved these support measures under EU State aid rules, in particular the Commission’s 2013 Banking Communication. BES shareholders and subordinated debt holders contributed fully (almost €7 billion) to the costs of the resolution in line with burden-sharing requirements. Another aspect that enabled the Commission to approve the aid was Portugal’s commitment to sell the bridge bank Novo Banco to limit distortions to competition. In its decision today, the Commission has confirmed under EU State aid rules: a) Portugal’s sales process of the bridge bank was open and competitive; b) Portuguese plans to grant additional State aid to finalise the BES resolution and bridge bank sale are in line with EU State aid rules; and c) the entity resulting from the sale of the bridge bank is viable in the long-term. Commissioner Margrethe Vestager,in charge of competition policy said: “Portugal has decided to sell Novo Banco to a new private owner, who will restructure the bank to return it to viability. We have approved Portugal’s plans to grant State aid to Novo Banco under EU rules, based on the bank’s far-reaching restructuring plan and measures taken to limit distortions to competition. Now it is important that the new owner successfully enacts the plan, so that that the bank can support the Portuguese economy.” A full press release is available online in ENFRDE and PT.