As widely predicted over the weekend, Banco Espírito Santo is no more. Carlos Costa, the Governor of the Bank of Portugal, announced a €4.9 billion recapitalisation plan using troika money late last night. It is a plan that splits the trouble-torn bank into two: a ‘good bank’ named Novo Banco, which opened its doors for business with a new look this morning – assuring all its customers that their accounts are safe – and a ‘bad bank’, isolating “the businesses related to the Espírito Santo family” and ensuring they cause no further harm.
As Portugal’s media is agreed, eyes now are on the forensic audits ongoing into the former bank’s activities to see “who, what, where” and discover the extent of the frauds and intrigue that have plunged one of the country’s most influential families into such disgrace.
Meantime, according to Novo Bank’s boss Vítor Bento, the ‘good bank’ has all the ingredients for becoming one of the country’s “principal financial institutions”.
“For our clients and collaborators only one thing has changed – your bank is now stronger and more secure,” he affirmed.
His words have cheered high-street clients – but larger scale investors are still very much in the dark, and political criticism abounds, with many asking why it took the Bank of Portugal so long to act.
Irregularities were obvious as early as September last year, explained one television commentator. Had reaction come sooner, the astronomic damages (€3.6 billion as reported last week) might have been less.
Stressing that BES’ former administration led by Ricardo Salgado could expect criminal consequences “in the short term”, Carlos Costa nonetheless declared that it was not easy for bank regulators to put their fingers on the “ruinous management” ongoing before things got seriously out of hand.
“These kind of fraudulent schemes among businesses are very difficult to detect before they enter into rupture,” he explained.
For now, it is a question of the markets and media digesting last night’s developments, while BES’ clients breathe a huge sigh of relief.
A telephone line (707201409) for those with questions has been set up and will run everyday from 9am to 6pm.
Troika money only temporary
The €4.9 billion ‘bailout’ comes from the Resolution Fund which is backed by Europe’s principal banks.
It is only a temporary solution designed to give Novo Banco’s new management time to find alternative investors.
Once this has happened, the money will be returned to the troika – but as yet details, like interest rates, have not been divulged.
Carlos Costa has repeatedly said that this solution – far from being anything like a nationalisation, or the kind of recapitalisation that went ahead with BPN – will not prejudice taxpayers.
His reassurance has spectacularly failed to convince critics, however. As former Lisbon mayor and social democrat Pedro Santana Lopes said after Costa’s television address, the “Bank of Portugal has been saying for weeks that BES was secure and that it had the capital it needed to guarantee solvency.”
In other words, only time will tell.
By NATASHA DONN [email protected]