THE DAY after 24 police officers and a judge raided the headquarters of Banco Espírito Santo, armed with a legal search warrant from the Procurador Geral (Attorney General), the bank’s director Ricardo Espírito Santo Salgado addressed key businessmen and members of the American Club in Lisbon.
The raid last month caught the bank’s employees completely by surprise and Mr. Salgado himself, said that he hadn’t been informed or warned about the action by investigators, who supposedly were looking into the fortunes of private clients at the bank’s Avenida da Liberdade 8th floor Private Banking Department. “No bank is above the law” he said in a later statement that day.
Mr. Salgado said that his bank was entirely at the disposal of the tax authorities to investigate alleged capital laundering (branqueamento) and tax evasion (fuga fiscal) by key clients. Millennium BCP, Finibanco, individual bank managers’ homes and several companies are also being investigated.
Talking to Judite de Sousa in a television interview on RTP Television at the end of last month, he said that his bank had “done nothing wrong” and that “we have nothing to fear, I have every confidence in the BES team.”
“We have an excellent team of professionals, there may have been some oversights here and there, but the law is fundamentally being followed,” added the banker.
The team, composed of members of the Polícia Judiciária, copied bank account details, deposits and transactions of private clients and investors from the company’s computer databases and had safes opened, confiscating documents. The investigation went ahead thanks to sweeping new government powers put in place to facilitate a general clamp down on fiscal fraud and tax evasion, measures that were introduced in last year’s budget by the PSD government of Durão Barroso.
The Portuguese tax office (Ministério das Finanças) investigating alleged fraud schemes, claims that millions of euros that should have been declared to the authorities, have been hidden away in private schemes over the past three years.
The Attorney General claims that the investigation carried out on behalf of the Ministério Público, which should have been concluded a year ago, would continue for the foreseeable future.
For its part, the administrators of Millennium BCP, whose private bank offices in Lisbon’s Avenida da Liberdade were raided the same day, said it was available to co-operate with the authorities. It also affirmed that the prevention of these kinds of illicit financial dealings were at the top of its list of priorities.
The question , why is the Bank of Portugal, who must have known about the alleged offences, not carrying out its own investigation into the matters beforehand? And why wasn’t its director dismissed when the alleged abuses came to light?
During his hour-long speech to the American Club, in which Mr. Salgado avoided any discussion into the allegations centred on his bank’s top clients, the banker gave an enlightening and interesting if rose-coloured talk on the Portuguese banking sector.
Mr. Salgado said that the banking sector in Portugal had undergone a successful restructuring following the opening up of the private sector in 1983, and the beginning of privatisation in the banking and insurance sectors in 1989.
He added that Portugal had successfully adapted to liberal and competitive market rules following the countries entry into the EU in 1985, Exchange Rate Mechanism (1992) and the introduction of the Euro (1999).
“We can say today that the Portuguese banking sector has responded very positively and dynamically to society and the economy,” he said.
“The banking sector has focused its activity in offering a range of innovative and technologically advanced services anticipating the needs of its clients and contributing to the improvement of their lives,” he added.
He affirmed that the Portuguese banking sector was one of the sectors of the Portuguese economy that demonstrated among the largest increases in economic productivity and competitiveness indices in the last 15 years. He went on to say that it has played a fundamental role in the economic growth and development of the Portuguese economy, taking advantage of particularly favourable financial conditions while showing social, community and environmental concern. He also claimed that it has contributed to an increase in the wealth and wellbeing of Portuguese families and the country as a whole.
Mr. Salgado explained that the banking sector had invested heavily in human resources with training investment rising by 60 per cent between 1999 and 2004, worth 310 million euros in 2004 alone.
He also highlighted that Portuguese families have been able, with the help of the banking sector, to take advantage of favourable economic conditions such as low interest rates and that, between 1998 and 2004, the amount of credit given by the banks for mortgages had shot up by around 17.3 per cent per year to reach 84.5 billion euros.
He downplayed recent studies released by the Bank of Portugal on the rise of family debt, saying that it wasn’t excessive and didn’t go beyond the 50 per cent safety ratio.
Mr. Salgado also said that the banking sector had assumed a relevant role in fiscal vigilance, collaborating with the state on tax matters, processing the retention of various taxes, namely VAT, Corporation Tax, Stamp Duty and Income Tax in property, company, share and financial service matters.
He concluded by saying that, given the difficult economic state of the European Union, the world recession and soaring petrol prices, only the UK and Dutch banking sectors had performed better in terms of productivity.