Tuesday December 2, 01:31 PM
UPDATE 1-Portugal grants loan of 450 mln euros to small bank
LISBON, Dec 2 (Reuters) - Portugal's government will allow a consortium of six banks to loan up to 450 million euros to small investment bank Banco Privado Portugues (BPP), which has serious liquidity problems, financial authorities said on Tuesday.
The government signed a law allowing the consortium -- including private banks Millennium BCP, Banco Espirito Santo (Lisbon: BES.LS - news) and Banco BPI -- to draw on a state guarantee to back the loan, a finance ministry spokeswoman said.
Bank of Portugal said it had nominated four new provisional administrators to restructure BPP.
The move had been expected after BPP last month requested a state-backed loan of 750 million euros to help it weather the global financial crisis.
The head of Portugal's central bank, Vitor Constancio, has said BPP was unlikely to get the 750 million euros in loans as its asset base was too small to justify such an amount.
Meanwhile, Bank of Portugal said in a statement the loan of up to 450 million euros was necessary to help BPP, which 'confronted serious liquidity problems that were transformed into a situation of serious financial imbalance' after Moody's downgraded its debt rating last month.
'Due to the contagion risks that the situation potentially involved, it was possible to reach agreement with other credit institutions to lend financial help to BPP and to make that help viable, a state guarantee was given,' it said.
(Reporting by Sergio Goncalves and Axel Bugge; Editing by Victoria Main and Andrew Macdonald) Keywords: FINANCIAL PORTUGAL/
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