Novobanco sale to French puts Crédito Agrócola on ECB's radar

Crédito Agrícola expected to come under the direct supervision of the European Central Bank (ECB) within three years, as a result of its growth in business. However, this is likely to happen sooner than expected , due to the sale of Novobanco to the French group BPCE, several industry sources told ECO.

With 26 billion euros in assets (2024 data), consolidating 67 regional banks, Crédito Agrícola is considered a 'small' bank in terms of size ( less significant institution , in the terms used by the ECB), which is why supervisory competence belongs to the Banco de Portugal within the scope of the Single Supervisory Mechanism.

The group expects to surpass the €30 billion asset threshold in 2028, and it was at that point that it was signaling changes in supervision from Lisbon to Frankfurt. Once it surpasses €30 billion, it will be considered a "significant institution," and therefore, will report directly to the ECB. This was admitted by the former president of Crédito Agrícola, Licínio Pina, to the newspaper Expresso ( paid access ): "(...) We are the sixth largest in the system. We are on track to be able to move under direct supervision by the ECB by 2028 if we maintain the established targets ," said the official, who recently replaced Sérgio Frade, former financial director, as the cooperative group's leader .

However, the sale of Novobanco to BPCE is expected to bring this timetable forward. Why? On the one hand, because Novobanco—which is directly scrutinized by the ECB—will come under the supervision of the Frankfurt authorities through the French group. This is because "it considers the highest level of consolidation within the Banking Union (i.e., excluding subsidiaries of banks headquartered in other Member States)," the Bank of Portugal clarifies in a response to ECO. This is the case with Totta and BPI, whose ECB supervision is exercised from the parent companies Santander and Caixabank, respectively.

Second, because the rules stipulate that the ECB exercises supervisory functions "with respect to the three most significant credit institutions in each participating Member State." In other words, Crédito Agrícola will take the place previously held by Novobanco, joining Caixa Geral de Depósitos (CGD) and BCP on the ECB's list. The cooperative group is the sixth-largest bank operating in Portugal, ahead of Banco Montepio (with assets of €18 billion at the end of 2024).

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ECO asked Crédito Agrícola how it is preparing for this eventuality to arise sooner than expected, but the bank considers it still premature to address this issue.

For this to happen, BPCE will still need to complete its €6.4 billion purchase of Novobanco from Lone Star and the Portuguese state, after receiving regulatory approval to finalize the acquisition of Portugal's fourth-largest bank by assets. The French bank's CEO, Nicolas Namias, expects this to happen next year.

The ECB annually updates the list of significant entities under its direct supervision. In total, there are more than 100 large banks that meet the requirements set by the Frankfurt-based regulatory authority.