FRANKFURT, Jan 13 (Reuters) - The European Central Bank distanced itself from a Portuguese decision to bail in senior bondholders at lender Novo Banco late last year, saying it neither requested nor approved the move. Portugal’s central bank approved a transfer of bonds last month from Novo Banco to Banco Espirito Santo to plug a 1.4 billion euro hole in Novo Banco’s finances identified by an ECB stress test. “Good bank” Novo Banco was created from BES in August 2014 after a 4.9 billion euro ($5.35 billion) rescue. Old debts and liabilities were kept with BES, which is being wound down. Some investors criticised the move, arguing that it discriminated between bondholders as losses were imposed on senior bondholders while others were unaffected, and have asked the ECB to intervene. “The decision by Banco de Portugal to bail in some senior bond holders in Novo Banco was taken exclusively by BdP under its national resolution powers,” the ECB said in a statement. “The ECB neither requested nor approved a bail-in of senior bond holders in this case.” Portugal pushed through the bail-in before Europe’s new Bank Resolution and Recovery Directive came into force at the end of the year. The directive, under which responsibility for resolving Europe’s top banks was transferred to the Single Resolution Mechanism from national authorities, is likely to make such moves more difficult. As the bail-in took place before the end of the year, it was still governed by Portuguese authorities and did not requite ECB approval. A market participant last week asked an ISDA Credit Derivatives Determinations Committee to classify the bail-in a “credit event” that would entitle investors who bought credit default swaps as insurance to a payout. (Reporting by Balazs Koranyi; Editing by Catherine Evans)
Further to our note yesterday , the European Central Bank ( plc ) has stated that it neither requested nor approved the move by Portugal to bail in senior bondholders at lender Novo Banco at the end of last year . Portugal 's central bank approved a transfer of funds last month from Novo Banco to Banco Espirito Santo to plug a € 1.4bn ( $ 1.5bn ) hole in Novo Banco 's debt , identified by an ECB stress test . Some investors criticised the move , arguing it discriminated between bondholders , as sanctions were imposed on senior investors while others were unaffected ; the investors have asked the ECB to intervene .