Portugal

The Espirito Santo Group (GES), whose collapse led to a state rescue of Portugal's second-largest bank in August, was a financially fragile "house of cards" for years and its chief knew of irregularities there, a former GES shareholder said, Reuters reported. Pedro Queiroz Pereira, chairman of conglomerate Semapa, told a parliament committee he had ordered a team of experts to scrutinise GES accounts after its chief and the Espirito Santo family patriarch Ricardo Salgado tried to sell debt of GES holding companies to Semapa and even win control of Semapa.

As investigators sift through the wreckage of Banco Espírito Santo SA, their focus is expanding beyond the alleged fraud and accounting problems that doomed the large Portuguese lender, the Wall Street Journal reported today. They also are looking into whether the bank was involved in money-laundering activities in multiple countries, according to people familiar with the investigations.

The first balance sheet of Portugal's Novo Banco, the successor to Banco Espirito Santo following a state rescue in August, will show solvency ratios above the required threshold and no need for additional capital, its chief executive said, Reuters reported. Eduardo Stock da Cunha told reporters on Thursday the bank's deposits were recovering after a drop in the wake of the rescue that split BES into the working Novo Banco and a "bad bank" exposed to liabilities of its founding Espirito Santo family.

The Bank of Portugal is investigating former management of Banco Espirito Santo over suspected illegal debt issuance via a Swiss go-between to replace liabilities of the collapsed business empire of the bank's founding family with BES debt. Bank of Portugal Governor Carlos Costa told a parliament committee looking into the rescue of BES by the state in August the central bank was also examining alleged concealment of losses by family holding company Espirito Santo International (ESI) that placed its debt via BES to the bank's retail clients.

International lenders have attacked Portugal for allowing the pace of reform to slacken since the country exited a three-year bailout programme, warning that some of the progress made at the cost of tough austerity measures could be reversed, the Financial Times reported. After their first mission to Portugal since its €78bn rescue programme ended in May, the “troika” of the European Commission, International Monetary Fund and European Central Bank on Wednesday said that greater reform efforts were needed to “underpin a still nascent economic recovery”.

Regulators in Portugal and Britain have temporarily banned short-selling of Portugal Telecom’s stock after the company’s shares declined to a record low on Monday over its exposure to a company with ties to the Espírito Santo family, the International New York Times DealBook blog reported. The Portuguese securities regulator, the Comissão do Mercado de Valores Mobiliários, temporarily restricted short-selling of Portugal Telecom late Monday, citing the company’s 10 percent drop in its share price that day.

Portugal's Novo Banco -- the successor to bailed-out Banco Espirito Santo (BES) -- has moved closer to a rescue deal for its Angolan unit, with the African nation's central bank agreeing a recapitalisation plan for the local business, Reuters reported. Novo Banco will retain a 9.9 percent stake in BES Angola (BESA) under a deal which will see some of its loans to the unit converted into equity, the National Bank of Angola said on Monday.

A court in Luxembourg has denied a creditor-protection request from the main holding companies of the Espírito Santo empire, paving the way for a liquidation of all its assets, The Wall Street Journal reported. Espírito Santo International SA and Rioforte Investments SA filed the request in July after they were unable to meet debt obligations. Espírito Santo International, whose main unit is Rioforte, was found to be in serious financial trouble earlier this year following an audit ordered by the Bank of Portugal. The audit also found accounting irregularities at the holding company.

Regulators probing Banco Espírito Santo SA, the large Portuguese bank whose collapse rattled global markets this summer, have focused in public on relatively recent problems that doomed the lender and its affiliated companies, The Wall Street Journal reported. But the bank’s reliance on off-balance-sheet funding vehicles stretches much further back than previously reported. Back in 2002, for example, when the bank was looking to boost its capital, it turned to two British Virgin Islands entities that had been set up on the bank’s behalf.

The Espírito Santo Financial Group, which at one point held about 25 percent of the bailed-out Portuguese lender Banco Espírito Santo, said on Thursday that it would file for bankruptcy after it was denied creditor protection by a Luxembourg court last week, the International New York Times DealBook blog reported. Espírito Santo Financial is part of a complex web of companies controlled by the Espírito Santo family.