Portugal

The “good” bank created after the bailout of the Portuguese lender Banco Espírito Santo last month was dealt a setback on Saturday when the three-person management team selected to turn around its business abruptly resigned, the International New York Times DealBook blog reported.

Banco Espírito Santo secretly lent money to its controlling shareholder for two years, documents have revealed – raising fresh questions over the Bank of Portugal’s supervision of a lender that went on to suffer one of Europe’s largest financial collapses, the Financial Times reported. BES, then Portugal’s largest listed bank, routed undeclared loans to Espírito Santo International (ESI) – then indirectly its 25 per cent shareholder – through Panama, the documents show. BES did not declare the loans to ESI in its accounts at the time.

A Swiss financial regulator said on Wednesday that it had initiated enforcement proceedings against a Swiss bank with ties to the Espírito Santo family’s troubled group of companies, the International New York Times DealBook blog reported. The Swiss Financial Market Supervisory Authority, or Finma, said it was investigating the role of Banque Privée Espírito Santo in the distribution of securities and financial products of one of the family companies.

Auditor KPMG has refused to approve bailed-out Banco Espirito Santo's first-half report and accounts, published on Monday, citing the bank's failure to provide adequate information on its financial position and also warned of possible further losses, Reuters reported. BES's consolidated report confirmed a loss of nearly 3.6 billion euros (4.73 billion US dollar), first revealed on July 30, largely due to its exposure to its founding Espirito Santo family's crumbling business empire.

Credit Suisse helped put together billions of dollars in securities that were issued by offshore investment vehicles of Banco Espirito Santo SA and then sold to the Portuguese bank's retail customers, the Wall Street Journal reported on Sunday. In the article in its online edition, the newspaper cited corporate filings and people familiar with the situation, saying customers didn't know the investment vehicles were loaded with debt issued by various Espirito Santo companies and served as a mechanism to finance the Portuguese conglomerate.

The healthy bank carved out of Portugal's heavily indebted Banco Espirito Santo will assume BES's 3 billion euros credit line to a troubled Angolan subsidiary but take provisions for losing the entire amount, the Bank of Portugal said on Tuesday, Reuters reported. Novo Banco was created to take on the healthier assets of one of Portugal's largest banks, leaving behind the original bank's shareholders, junior creditors and loans linked to companies of the Espirito Santo founding family which are under investigation for financial irregularities.

Portuguese banks will work together with the authorities for the swiftest sale of the new, healthy bank carved out of the troubled Banco Espirito Santo, the head of the Portuguese Banking Association (APB) said yesterday, Reuters reported. Fernando Faria de Oliveira told Reuters that the intervention by the Bank of Portugal to rescue one of the country's largest lenders that involved an injection of 4.9 billion euros mostly in state loans, was positive considering BES's systemic importance.

A panel of the International Swaps and Derivatives Association today ruled that the Portuguese central bank's decision to break up Banco Espírito Santo won't trigger a payout on insurance-like contracts linked to the stricken lender's debt, the Wall Street Journal reported today. ISDA was asked on Monday to rule whether the Portuguese Central Bank's decision to split BES into two would qualify as a bankruptcy credit event, meaning that any contracts on BES debt—known as credit default swaps—would be activated.

Portugal’s central bank stepped up efforts to clean up the troubled lender Banco Espírito Santo and end its family control after the bank reported a stunning first-half loss of $4.8 billion that will force it to raise more capital, the International New York Times reported. After the bank’s earnings report, the central bank issued a statement ordering Banco Espírito Santo to raise more funds and announced the suspension of three members of the Espírito Santo family, which has controlled the bank for generations.

Banco Espírito Santo has posted a first-half net loss of €3.58bn that exposes the full extent of the Portuguese lender’s exposure to the financial woes engulfing its main shareholder, the Espírito Santo family group, the Financial Times reported. BES, Portugal’s largest listed lender by assets, said “extraordinary events” had resulted in impairment and contingency costs totalling €4.25bn and had cut its capital strength to below the regulatory minimum. The record loss wipes out BES’s existing capital buffer of €2.1bn and implies that it will have to raise fresh capital.