March 9, 2017 / 6:00 PM / 10 months ago

Portugal to create new regulator for financial stability

LISBON, March 9 (Reuters) - Portugal’s government intends to create a new financial supervisor which would carry out bank rescues and take on the role of ensuring the overall stability of the banking system, the finance minister said on Thursday.

The new entity would rank above the central bank, the CMVM stock market regulator and the authority which supervises insurance and pension funds.

The changes, which would take the responsibility of bank rescues and oversight of overall financial stability away from the Bank of Portugal, could potentially go against efforts to assign more banking sector supervision in the eurozone to European institutions.

Finance Minister Mario Centeno said the change was necessary after recent high-profile bank failures “oblige us to return to question the efficiency of the supervisory system.”

Centeno told parliament the new supervisor would be independent and replace two existing councils that oversee the financial system. They include members from the central bank, finance ministry and market regulators.

“This new entity would have ultimate responsibility for financial stability and should function as the macroprudential authority and national resolution authority,” Centeno said.

The proposal comes after a series of high-profile bank collapses in recent years, including Portugal’s largest private sector bank Banco Espirito Santo (BES) in 2014 and Madeira-based Banif in 2015. The state injected 3.9 billion euros into the rescue of BES and 2.2 billion euros into Banif.

The central bank has faced criticism at home for failing to foresee those failures.

The minister said the bank failures “gave evidence of various failures in financial regulation and supervision, weakening the credibility of national authorities which were responsible for the relevant functions.”

The Bank of Portugal is currently the institution which carries out bank rescues, and is now in the final stage of selling Novo Banco, the ‘good bank’ which was created after the collapse of Banco Espirito Santo in 2014. (Reporting by Sergio Goncalves, writing by Axel Bugge; Editing by Mark Trevelyan)

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