Montepio under pressure in Bank of Portugal audit

The chairman of Montepio, Tomás Correia, has accused a member of the General Council of Montepio, Eugénio Rosa, of lying to customers and associates in the statements he published on his personal website, which accuses the current administration of mismanagement.

Montepio claims that its exposure to the collapsed Espirito Santio Group is "properly provisioned."

In an interview in TVi last night, Tomás Correia denied that the bank’s exposure to the Espírito Santo Group was in excess of €200 million and that the exposure "is properly provisioned" and that the current audit imposed by the Bank of Portugal is part of "a perfectly normal framework."

Asked if Montepio’s such exposure might be more than €200 million, as reported in O Publico on 19 July, Tomás Correia said, "I deny this completely." Correia has admitted to a provision of €150 million which eh says is properly accounted for.

The Bank of Portugal audit into Montepio’s affairs "has no association with BES," assures Correia, adding that the Bank of Portugal audited Montepio in October last year as well.

So everyone can calm down and rest assured that all is well at Montepio," because the group is well capitalised, very liquid and very well provisioned."

Any similarities to Ricardo Salgado, the former BES Chief Executive’s, assurances are purely incidental.

However, the secretary general of the Federation of the Financial Sector, Aníbal Ribeiro, said today that an urgent meeting will be requested with the Montepio management "to understand how things are working." Ribeiro really also wants an assurance that the pension fund for Montepio staff has not been raided or pledged.

Montepio may be well capitalised but, using a system that was a family favourite at BES, it is capitalised with money from its own customers as late last year Montepio increased its capital by selling bonds to its own flock.

In a Montepio first, in late 2013 customers were asked to finance a capital increase for the bank. It needed a rather urgent €200 million to cover losses and make provisions.

Montepio took the market by surprise as it has only just completed a capital strengthening exercise of €100 million.

This, plus the €200 million from customers raised the bank’s capital to €1.5 billion.

Montepio devised a bafflingly complex perpetual bond to foist on its investors which will only be paid if the bank makes profits. The small print further explains that this may not in fact be the case if there is "a lack of sufficient reserves."

Tomás Correia is shining it on at the moment and the last thing the Bank of Portugal needs is to uncover any black holes, there are reputations at stake after all.

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