Bank of Portugal's governor hangs on by a thread

The Bank of Portugal’s embattled governor, Carlos Costa, acknowledges the criticism of his performance but says he will carry on to the end to guarantee the independence of the central bank and its mission in stabilising the financial system.

In an interview published in Público today, Carlos Costa says he feels no pressure at all from the government to quit his job and his staying is the only way the Bank of Portugal can remain independent.

"I have a very strong commitment to the mission and the objectives - and we are achieving them, namely the objective of financial stability - I do not see why I should not continue. On the contrary. There is no independence of an institution without a strong commitment to the fulfillment of the mandates," claimed Costa.

This interview comes at a time when Costa’s performance has the left wing parties that are supporting the government, sharply critical over what they regard as “serious failures,” and further criticism now is coming from Socialist Party MPs despite the prime minister still suppporting Carlos Costa despite having been critical of many of his decisions.

Carlos Costa also fended off criticism that the Bank of Portugal could have done more to prevent the 2014 collapse of Banco Espírito Santo, commenting, "What we did was what we could do, in a fair evaluation of the information we had available, using the common sense required by the situation," blaming the collapse on human error, the human in question being Ricardo Salgado, the BES chief executive.

The prime minister today said that the opposition PSD party has not been supporting Carlos Costa - but that he has been, amid the accusations of the governor's incompetence, adding that the law does not actually allow a government to dismiss a governor of the Bank of Portugal - a point picked up y the leader of the Communist Party, Jerónimo de Sousa, who said today that the Bank of Portugal is but a dependency of the European Central Bank and that Portuguese "sovereignty and the possibility of choice" must be restored.

As for the independence of the Bank of Portugal, the Left Bloc leader, Catarina Martins, said in parliament today that her party was critical of Carlos Costa, “precisely because he proved incapable of independence."

As for the internal report unearthed at the Bank of Portugal that said Ricardo Salgado was not a fit and proper person to continue to lead BES, Carlos Costa said this was an internal document, "part of a series of internal reflections," and therefore not on record and that he did not have to report it to the parliamentary committee of inquiry looking into the BES collapse.

Carlos Costa said he had demanded from Ricardo Salgado a succession plan and that the Espírito Santo family moves away from the management of BES.

Whether Carlos Costa can continue to work under this sort of pressure remains to be seen but the criticism is unlikely to die down, especially when Novo Banco is sold to Lone Star at a bargain basement price with other far higher offers being dismissed on a technicality.

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