Portugal’s top bankers have called on Europe’s leaders to stop “playing with fire” and moderate their stance towards the eurozone periphery, or risk instilling alarm among bank depositors in future. In separate interviews, the heads of the country’s two biggest banks – Millennium BCP and Banco Espírito Santo – said they were concerned that the precedent set by Europe’s treatment of Cyprus’s recent troubles had increased nervousness across the eurozone to dangerous levels. “Leaders need to moderate their language. This could be very bad,” Ricardo Espírito Santo Salgado, chief executive of BES, told the Financial Times. Nuno Amado, his opposite number at BCP, talked of a “Cyprus virus”, saying: “If someone had designed a plan to hurt the European market, it would be difficult to think of something better . . . You can’t keep playing with fire.” The comments come in the wake of the EU’s messy deal to bail out Cyprus, which initially envisaged a so-called haircut even on deposits below the pan-Europe €100,000 deposit guarantee. Although the threshold for haircuts was later lifted above the guarantee level, bankers across the eurozone complained that the damage had been done. Portuguese bankers said that for several days in the wake of the Cyprus affair customers were jittery. “There was huge nervousness,” Mr Amado said. BES and Portugal’s number three bank, BPI, experienced a rush of clients wanting to move cash from deposit accounts into vaults within the banks. Read more. (Subscription required.)
Daily Insolvency News Headlines
Mon., May 20, 2013
Many duped savers at Spanish lender Bankia are shunning a state-supervised compensation scheme in favor of expensive lawsuits, prolonging a mis-selling scandal and complicating efforts to restore faith in the banking system, Reuters reported. The disputes over mis-selling at Bankia and other nationalized banks have created a major headache for the government as it tries to take the next step in their rescue, imposing large losses on holders of junior debt. It set up the arbitration process to try to end daily protests by some of those debt holders - elderly savers who say they were mis-sold complex debt products as safe, high-interest deposit accounts. But many people caught up in Bankia's rescue see it as a trick to stop them getting their money back. The terms of its EU-funded 24.5 billion euro bailout require Bankia and its parent group BFA to raise 6.5 billion euros by converting debt into equity at a large discount. Whether customers win misselling claims through the courts or through the state-sponsored scheme, the bank will have to find the money to compensate them, a factor not taken into account when its recapitalization was calculated. "The arbitration process is not something positive for Bankia. The bank will have to settle those claims in cash," said a banker involved in Bankia's recapitalization. Court cases drag out the issue for even longer. "You don't know when the legal cases will end, they could last years." Bankia declined to say how many court cases had been lodged against it related to preference shares, but said it was much fewer than the number who had requested arbitration. A bank spokesman said the compensation claims would be easily covered by parent group BFA and would not affect Bankia's capital. Preference share holders will have the market value of their shares deducted from any compensation package. Read more.
Spanish judges this week sent the strongest signal yet that they intend to crack down on former executives at bailed-out banks by putting the ex-president of Caja Madrid into custody in the first detention of a top financier since the financial crisis began, the Irish Times reported. Amid intensifying anger at a banking crisis that last year forced Spain to accept a European rescue for its lenders, Miguel Blesa, the 65-year-old former head of the bank, the precursor to the rescued Bankia, will remain in jail ahead of trial until he posts bail of €2.5 million. Mr Blesa’s lawyers were yesterday finalising the bail deposit, Spanish media reported. According to the court ruling, Mr Blesa is being investigated because he did not conduct appropriate due diligence when Caja Madrid purchased City National Bank of Florida in 2008, with the $1.1 billion acquisition having potentially resulted in losses of at least €500 million. He is also being investigated for loans made to a now collapsed Spanish tour operator. Soraya Sáenz de Santamaría, Spain’s deputy prime minister, said the government would respect the decision of the judge and reiterated the measures taken by Madrid to reform and depoliticise the country’s regional savings banks, known as cajas. Read more.
Italy's new government took its first concrete steps Friday, announcing some €3 billion ($3.86 billion) in economic measures aimed at offering relief to households and workers amid the country's longest postwar recession, The Wall Street Journal reported. Prime Minister Enrico Letta, who was sworn in last month as head of a coalition cabinet, said an unpopular tax on primary residences would be suspended and an extra €1 billion would be pumped into a wage-supplement program. The measures were the bare minimum of what the new government has pledged. Notably, none of the announced benefits address what politicians have identified as the national priority: youth unemployment. Still, they signal a breakthrough of sorts given the stark political differences among the politicians that make up the patchwork majority behind Italy's first bipartisan government in more than 60 years. Read more. (Subscription required.)
Central to the Government’s plan to deal with the legacy of personal debt is the creation of a new brand of insolvency professional, due to be registered from next summer. Depending on who you talk to, the Personal Insolvency Practitioner (PIP) will be jumping on the greatest legal gravy train for years, or embarking on a journey that will be far more hassle than it’s worth, the Irish Times reported. What’s certain, according to Lorcan O’Connor, director of the Insolvency Service of Ireland (ISI), is that “if we don’t get the practitioner bit right the system won’t work”. His agency is due to start registering the first PIPs from next June, and while “we will not have several hundred authorised by June… we will start to create the list [THEN]and that will increase during the summer”. To be a PIP, you must be a solicitor, a barrister, a qualified accountant or financial advisor, or otherwise hold a relevant qualification. As important, said Mr O’Connor, were “intangible” qualities, like communications skills and an ability to deal sensitively with people in crisis. Read more.
Lawyers for Ulster Bank have applied to a US court seeking to intervene in the bankruptcy proceedings of property developer Sean Dunne so the bank can proceed with its own bankruptcy proceedings against him in Ireland, the Irish Times reported. Ulster Bank said that Mr Dunne’s filing for bankruptcy in the US was the “culmination of extraordinary efforts” by him to “avoid the application of Irish law to an Irish national with respect to Irish debts and Irish assets”. Mr Dunne’s filing for bankruptcy in the US in March was an attempt by him to avoid the effect of Irish bankruptcy proceedings initiated six weeks before he applied for bankruptcy in the US, the bank said. Ulster Bank argued in the application to the court in filings lodged in the US bankruptcy court in Connecticut yesterday that Mr Dunne’s connection to the US, much less the bankruptcy court, was “tenuous at best.” Only two of his creditors are located in the US and every single piece of property, every bank account - with the exception of one US bank account with $15 in it - and every since creditor are based outside the US, almost entirely in Ireland, the bank said. Ulster Bank said Mr Dunne’s filing for bankruptcy was a “rather blatant attempt” to use the US court to “frustrate the laws and jurisdiction of a foreign court” and that this should be enough to allow the bank to proceed with its case before the Irish courts. The bank told the US bankruptcy court that “a parallel bankruptcy proceeding in Ireland is critical for the orderly, efficient and just administration of this case.” Read more.