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Spanish Aid to Portuguese Banking System

Spanish Aid to Portuguese Banking System

Important financial agreements made recently with Spanish investors are the reason why many legislators, businessmen, and influential commentators in Portugal flagged their concerns in regards to the country’s financial independence. Banco BPI will be the third Portuguese bank sold in the last three months to Spanish buyers if CaixaBank and Banco BPI will manage to reach an agreement.

Portuguese nationalist reaction could raise obstacles to transactions in the financial sector, by representing a threat to the European Central Bank’s efforts to promote cross-border mergers to strengthen the banking system of the currency bloc. Unofficially, the ECB supports purchases by rival Spanish banks, as they could help speed up the reform of the Portuguese banking system. A number of Portuguese banks have received state aid in 2012, but many are still faced with low profitability, poor performing loans, and capital. Spanish banks are interested in acquisitions in Portugal because of the financial institutions being relatively inexpensive, geographically close, and the market having a demography similar to home. For these reasons, the Spanish bankers tend to understand very well what customers want in Portugal. The Portuguese government welcomes and encourages Spanish investments in Portugal. On the other hand, officials, including the President, are closely watching the situation in order for these agreements not to affect country’s financial independence.

 

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