Bank of Cabo Verde suspends activity of Novo Banco

9 March 2017

The Bank of Cabo Verde (BCV) decided to suspend the business of Novo Banco and transfer customers’ deposits and some loans to the Caixa Económica de Cabo Verde bank, announced the Cape Verdean central bank in a statement issued on Wednesday in Praia.

The BCV also reported that Novo Banco was prohibited from lending and investing funds in certain types of assets and receiving deposits, and the authorisation to conduct banking activity will be revoked “at a time and when the BCV deems it,” which will be followed by the administrative liquidation procedure laid down in the law on credit institutions.

The central bank also reported that the assets that were not passed on to Caixa Económica de Cabo Verde would remain at Novo Banco, a bank that is undergoing liquidation, which will be managed by a board that has yet to be appointed.

Novo Banco was authorized to start operations in February 2010 with an initial capital of 300 million escudos subscribed 95% by public shareholders. It was created for the express purpose of financing loans to specific business sectors, including agribusiness, industry, tourism and fishing, intending to benefit small business owners.

In December 2012, the bank’s capital was increased to 600 million escudos and 849 million escudos in May 2015, when the public shareholders held 97.03% of the capital, but the capital ratios of the bank as well as its economic and financial situation have always been fragile.

The accumulation of negative results, the continued increase in impairments due to loan provisions, a worsening liquidity situation and frustrated expectations about Novo Banco’s restructuring plan led to the decision that has now been announced, said Cabo Verde’s Central Bank. (macauhub)