THE BANCO Português de Negócios (BPN) has become the first national bank to fall victim to the international credit crisis.
After failing to find a buyer for the institution, which has clocked up a 700 million euro debt, the Portuguese government has been forced to nationalise the bank.
The initiative, announced by the Minister of Finances, Fernando Teixeira dos Santos, and Governor of the Bank of Portugal, Vítor Constâncio, following an extraordinary meeting of the Council of Ministers on Sunday, comes after three weeks of government promises that the Portuguese banking system is able to withstand the financial crisis.
BPN is now to be managed directly by state-run Caixa Geral de Depósitos, effectively nationalising it when credit supplies dried up.
However the bank is alleged within financial circles to have been undertaking “doubtful and illegal trading practises” for some time, with its past management leaving BPN with a financial black hole of between 240 and 300 million euros.
According to Fernando Teixeira dos Santos, the decision was taken after several failed attempts to sell the bank and its assets to other retail banks, both national and international such as Banco Espirito Santo, Banco Português de Investimento (BPI), Millennium bcp and Santander Totta.
The state also refused to underwrite the bank’s debts in a viability plan recently presented by the bank’s president Miguel Cadilhe.
BPN, which has 4.5 million Euros in deposit accounts, was faced with a “situation of imminent bankruptcy, unable to continue its business or make payments,” according to the Finance Minister.
The situation was described as a “slow haemorrhage of funds” whereby the bank was financially bleeding to death as companies and institutions began withdrawing their funds or failed to meet interest rate payments.
The Governor of the Bank of Portugal, Vítor Constâncio, said that even the Portuguese supervisory authorities, considered excellent internationally, were not infallible and assured the media that “no other Portuguese banks were faced with a similar situation.”
Ever since taking the helm at the bank in June, Miguel Cadilhe, has tried to restructure and save the bank’s finances by a three-stage capital increase plan and the selling off of assets.
But the plan, already in a delicate situation, didn’t work once the overall effects of the international credit crisis hit and liquidity began to dry up.
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