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Lisbon to inject €6.6bn into largest banks, by Peter Wise in Lisbon and Peter Spiegel in Brussels, FT, 04/06/12

The Portuguese government will inject €6.6bn into three of the country’s largest banks, becoming the latest eurozone country to tap international bailout funding for an undercapitalised financial sector.
Vítor Gaspar, Portuguese finance minister, said the funds would ensure that Banco Commercial Portugues, Banco BPI and state-owned Caixa Geral de Depósitos met tough new capital requirements set by the European Banking Authority.
Portugal’s €78bn EU-International Monetary Fund rescue programme, which was agreed last year, earmarked €12bn for aiding its banks. About €5bn of the funds for the three banks will come from the bailout.
The Portuguese announcement comes as banks in several other eurozone countries struggle to hit new EBA capital ratios by the end of the month.
Cypriot officials have said they may be forced to seek EU aid to meet the 9 per cent threshold for core tier one capital, a key measure of financial strength. Spanish officials have also begun to acknowledge they will need outside help to recapitalise their banking sector, brought low by the bursting of Spain’s property bubble, and may be forced to seek EU funds.
The stresses on eurozone banks have led to renewed calls for a so-called “banking union” in the EU, which could include a common eurozone fund to recapitalise and bailout failing banks, enabling stronger governments to help weaker ones by pooling resources.
Olli Rehn, the EU’s top economic official, and Pierre Moscovici, the new French finance minister, said on Monday that the eurozone’s €500bn rescue fund should be allowed to inject capital into struggling banks – a move increasingly sought by Madrid but blocked by Berlin, which fears such aid might come without the controls bailout lenders have insisted on for sovereign rescues.
Portugal’s international lenders said in a statement that Lisbon was implementing its bailout programme “broadly as planned”, noting that its external adjustment was “proceeding faster than expected”.
Despite Portugal’s progress, EU officials are increasingly planning for a second bailout for Lisbon. Borrowing costs on Portugal’s benchmark 10-year bonds have remained above 10 per cent for more than a year – far too high for it to return to the private sector for financing next year, as the plan envisages. The struggle to find private capital for eurozone banks could be further complicated on Wednesday, when Michel Barnier, the EU’s top financial regulator, unveils his long-awaited plan for failing financial institutions. It is expected to include provisions that would force losses onto private investors in collapsing banks, or so-called “bail-ins”.
Drafts of the proposal would require member states to set aside a minimum amount of funds for bank rescues and lend to other national schemes in an emergency. A more ambitious Commission proposal for a pan-EU fund is to be unveiled at a later date, probably after 2014.
Herman Van Rompuy, European Council president, said on Monday that bank resolution and a deposit guarantee scheme form part of his plan for further economic integration. But he cautioned such a blueprint would only deal with longer-term issues and was “irrelevant to those immediate problems” faced by countries like Spain.