Pedro Passos Coelho’s PSD party is demanding a commission of inquiry into Caixa Geral de Depósitos' dire financial situation while the government and Portugal's president seek alternatives to a formal inquiry.
The PSD has 89 serving MPs and needs just 42 to force a full inquiry but this move is being resisted by the government on the grounds of the stability of the Portuguese financial system.
The Prime Minister António Costa instead wants to set up meetings behind closed doors to look at Caixa's current position and the Summer 2015 audit which concluded the bank had been giving out loans to companies that lacked collateral and were unlikely therefore to be able to repay the money.
The Governor of the Bank of Portugal, Carlos Costa (pictured above) also is keen to discuss the situation at Caixa behind closed doors and to offer his own explanation as to how a State owned bank under his regulatory control now needs a injection of €4 billion after two injections of capital in recent years totalling €3.6 billion.
The excuse for not wanting to see a public inquiry established is that this might ‘destabilise the Portuguese financial system.’
Portugal’s president, Marcelo Rebelo de Sousa, officially is making no comment as it is not his place to do so. However, it is clear that he is involved in behind-the-scenes work to limit any fall-out.
Rebelo de Sousa met the Bank of Portugal governor last Friday but claims that Caixa Geral was not discussed - despite it being the hottest financial topic in the country at the moment.
The Prime Minister confirmed he seeks "a way to satisfy the legitimate public interest to clarify the doubts (at Caixa) and look for an alternative," and wants to get all the supervisory bodies together in front of the Finance Committee to look at recent audits and work out who will be holding the time-bomb when it explodes.
The PM added that this step will enable him to come up with an assessment on Caixa for the European Commission which needs to authorise the €4 billion needed to keep the bank solvent.
Passos Coelho, the PSD leader, wants a full inquiry in the public eye, saying that hiding behind closed doors will increase suspicion that the bank is terminally ill, blaming the media for feeding the flames of suspicion despite having been letting his views be known to the media.
Catarina Martins from the Left Bloc prefers a closed session to look at the risks and to find out how bad the damage is at Caixa.
"Caixa is a solid bank, but it is true that some loans that have been made should be investigated. And so, the Left Bloc has proposed a forensic audit of high-risk loans at Caixa Geral," said Martins today, adding that this would be quicker than a full Commission of Inquiry and that any evidence given could be ‘less limited’ as it was not in the public eye.
The Prime Minister referred to Caixa as ‘the Portuguese financial system’s great pillar,’ and agreed with the president, and the governor of the Bank of Portugal, of “the need to be very careful, not to seek to destabilise our financial system.”
The media sees little justification for the lack of an open explanation for Caixa’s €4 billion recapitalisation, especially after two injections of capital in recent years totalling €3.6 billion.
By operating behind closed doors the government risks capital flight, as happened with Banif and BES when the public lost confidence in their bank.
Caixa Geral is a public bank and should report to the public through open government, not operate under a cloak of secrecy which causes suspicion to run riot.
The public needs to know what the management has been up to with public money, how the bad debt figure rose from just over €2 billion last August to €4 billion this year, why Caixa lent money to customers that appear to have lacked security but had political connection, and how much is recoverable.
While these simple questions remain unanswered, rumour and suspicion will take hold - whether fanned by the media or not.
Comments
These 'bodies' were never intended, as we can all now see, to supervise or regulate. They were established because Brussels required they 'exist' ... but there is no culture or history in Portugal under pinning the concept of supervision or regulation. So these vital functions in a modern economy and society never happened here.
Everywhere you look in Portugal it is the same. For example - in theory Animal Welfare and Race Relations legislation has been in Portugal for nearly 2 decades. Neither has effectively progressed at all and with racial awareness in a country that officially has only ever had one defined racial type - the Portuguese, how can it ?