The Accounts Court has been scathing. Within a couple of weeks of the exit from the Bank of Portugal by former governor Carlos Costa, fur has started to fly, albeit in a somewhat wispy way.
Diário de Notícias front page today screams “Accounts Court slates Carlos Costa’s role in BES resolution”.
“Lack of independence, insufficient instruments (of control), conflict of interests”.
Says the paper, the conclusions of the court – which also considered Costa’s actions with regard to the resolution of Banif bank – “are not bland”.
Bottom line: “the mixing of the waters at the Bank of Portugal damaged the country and its taxpayers”.
Of course none of this is ‘new’ in that politicians have been saying as much for years.
It’s simply that Mr Costa is no longer at his post now, and perceived failings can be ‘tackled’.
Explains DN, the Accounts Court “underlines the urgency for creating measures that avoid a repetition of failures, in the context that Covid-19 increases the risk to banks”.
The paper points out that during Mr Costa’s treatment of BES and BANIF, the ANR (authority of national resolution) – created only in 2012 – was clearly not being ‘independent’ (as it is meant to be).
Indeed, decisions on how it ‘exercised its functions’, were taken by the administrative council of the Bank of Portugal.
In this way “risks of complacency” on the part of the supervisor ‘over those being supervised’ were simply not properly covered, even if that complacency was not deliberate.
This is all really about protecting citizens’ from bad decision-making in the future, rather than making up for any less than ideal decisions within Mr Costa’s 10-year mandate.
Says DN, the Accounts Court is clear: “Banking resolution in Portugal poses risks to the stability of the national financial system”.
The situation is “more serious”, explains the paper, when at the end of last year one considers that the Resolution Fund held negative own-resources of over €7 billion and a large debt of €6.233 billion, 89% of which was owed to the Portuguese State “for loans taken out to finance the financial support given since 2014 to BES and Banif”.
Stresses the Accounts Court: “One should consider the perspective of the citizens”.
To this end, the court has made recommendations to the Minister for Finance João Leão, and his predecessor Mário Centeno – now the new governor of the country’s central bank – to make sure they both tighten up on the independence required by the ANR.