Portugal: European Commission approves creation of new development bank

The European Commission on Tuesday said that it had approved the creation of the new Banco Português de Fomento (BPF), which was decided by Portugal’s government in June.

According to a statement from the European Union executive, it approved under EU rules for state aid Portugal’s plans to create a new national development bank to promote the growth of the Portuguese economy.

The commission said that the institution’s creation is an appropriate and proportional solution to provide additional financing to companies and projects that would otherwise lack finance due to market failures.

The BPF results from the merger of Portugal’s existing Development Finance Institution (IFD), the SPGM (the Portuguese Mutual Guarantee System), and PME Investimentos, an institution that funds small and medium-sized enterprises, and is to be owned by the Portuguese state with share capital of €255 million. Its activities are to be focussed on financing opportunities that have been failed by the loan and capital markets.

According to the statement, BFP will focus on improving access to finance for research and innovation projects, sustainable infrastructures, social investment and skills, as well as projects that increase the competitiveness of Portuguese companies and encourage public sector investments.

At a cabinet meeting on 18 June, the government approved legislation creating BFP, as previously foreseen in its Economic and Social Stabilisation Programme (PEES), approved as part of its plan to combat the economic crisis caused by the Covid-19 pandemic.