Recapitalisation of Caixa Geral de Depósitos temporarily cleared
By Sophie Mosca | Wednesday 18 July 2012
The European Commission temporarily approved, on 18 July, an injection of €1,650 million of core tier one capital in Caixa Geral de Depósitos S.A. (CGD), Portugal’s largest banking group, “for reasons of financial stability”. The executive will adopt a final decision on the recapitalisation of the 100% state-owned bank once it has assessed the restructuring plan that Lisbon has agreed to present within six months.
On 28 June, Portugal notified several recapitalisation measures to enable CGD to meet the European Banking Authority’s stress test requirements. The injection is made up of ordinary shares issued by CGD in the amount of €750 million and hybrid securities in the amount of €900 million.
The EU executive finds that the recapitalisation measures include elements of state aid because they entail the use of state resources and because they enable the bank to raise capital quickly in prevailing market conditions so as to meet the EBA requirements. It nevertheless considers that the capital injection is well-targeted, limited to the minimum necessary and contains sufficient safeguards to limit distortions of competition.
As a public bank, Caixa Geral de Depósitos was not authorised to receive aid provided by the EU and the International Monetary Fund under the rescue plan for Portugal.
With this capital injection, it reaches the 9% capital requirement level set by the EU regulator. At the end of 2011, CGD’s assets totalled €120.6 billion.