LISBON (Reuters) - Portugal's market regulator on Tuesday suspended trading in bonds issued by Novo Banco, which media reports said might mean the bonds could be used to fill a capital shortfall at the bank.
Novo Banco is the "good bank" created from Banco Espirito Santo (LS:BES) in August 2014 in a 4.9 billion euro (3.6 billion pounds) rescue. Novo Banco has no shares but its bonds are traded.
Last month, the European Central Bank ordered Novo Banco to plug a 1.4 billion-euro hole in its capital.
TSF radio, citing unidentified sources, said that the ECB and the Bank of Portugal had put together a recapitalisation plan for Novo Banco that would convert senior debt or bonds into capital. But this is still awaiting a go-ahead from the government. TSF radio also said the bonds would plug 1.2 billion euros of Novo Banco's capital shortfall.
Bank of Portugal, the country's finance ministry and Novo Banco declined to comment.
The Bank of Portugal has been trying to sell Novo Banco, but the process was halted in September as the bids it received were seen as too low. The central bank said the sale process would be relaunched in January.