THE GOVERNOR of the Bank of Portugal, Vítor Constâncio, said he saw no reasons why he should resign after a three hour grilling by parliamentary deputies last week over his handling of the BPN crisis.
In a painful attack from the far right and far left of the Assembleia da República, the governor said that he had “done everything that could to be done” over the bank, which was nationalised after being on the brink of collapse.
Vítor Constâncio argued that it was only in 2007 that he first came across a reference to the shady offshore dealings with Cape Verde-based Banco Insular while analysing a credit dossier, and that up until then successive problems at BPN “were being resolved and did not seem to justify its bankruptcy”.
Portuguese news agency Lusa also revealed last week that BPN had sent 30 million euros to Brazil via offshore vehicles between January 2007 and April 2008, with the largest number of transactions registered in December 2007, two months before CEO José Oliveira e Costa had stood down.
At that time, around 20 million euros was sent to Brazil via Cayman Island offshore banks such as Banco Insular de Cape Verde and BPN Cayman ending up in Brazilian companies held by the Sociedade Lusa de Negócios (SLN)
According to Lusa, these operations were registered with the Brazilian central bank but were abruptly stopped in July 2008 when Miguel Cadilhe took over at the bank.
The news agency adds that the Bank of Brazil also referred to loans conceded to Brazilian companies within the SLN Group by the Angolan bank Banco Africano de Investimento (held by Sonagol) which is a financial partner of BPN Brazil, Bickley Finance LCC and BPN itself.
Then came news that the Bank of Portugal (BdP) had in July authorised BPN Group shareholders to increase its debt by 100 million euros using the bank’s customer deposits as surety by issuing short-term bonds.
The supervisory authority at BdP took this decision three months before the bank’s nationalisation in full knowledge that the bank was insolvent with an 800 million euro black hole.
In other words, instead of using shareholders’ or BPN capital reserves to raise money for its recapitalisation programme, BPN used regular bank deposits to finance the arrangement through a partner company called SLN Valor.
Anyone who bought bonds issued by SLN Valor, whose principal shareholders included the ex-president José Oliveira e Costa, has effectively seen their investment compromised since on BPN’s nationalisation the bond issuing company ceases to hold any assets apart from a 20 million euro deposit – far less than the 300 million euro refinance package.
This whole doubtful operation was organised and carried out by Efisa Bank, held by BPN and lead by Abdool Vakil who was part of the discredited Oliveira e Costa team at BPN.
The recapitalisation programme that BPN was carrying out up until its effective collapse was to have been scheduled in three phases, totalling 300 million euros, with only the first tranche of 100 million euros being carried out in August 2008.
Now the most probable scenario is that all those who bought such bonds, most being ordinary customers, face holding pieces of paper that are completely worthless.
“Look me straight in the eyes and tell me that we should have confidence in you to carry on. If an army general loses two or three battles he naturally has to be replaced. You’ve lost two or three cases so far (Millennium bcp and BPI) so why shouldn’t you go,” said Paulo Portas, leader of the CDS-PP party.
Vítor Constâncio said his “conscience was clear”, that he couldn’t possibly know of “every single hidden financial deal carried on by the nation’s banks” and that it wasn’t the Bank of Portugal’s job to act as “spymaster and police force” in every one of the nation’s 52 or so financial institutions.
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