Portugal's 'swaps' contracts - "No normal human being thinks it acceptable to pay 200% interest"

Paul Rees 12 July 2017

santander2 The Deputy Secretary of State for Finance, Ricardo Mourinho Félix, and Finance Minister Mário Centeno were under pressure today to explain why Portugal’s taxpayers are funding interest rates of up to 200% payable to the Spanish-owned bank, Santander Totta.

The ‘swaps’ contracts, entered into by the management of some of Portugal’s publicly owned transport companies including Metro do Porto, Metro de Lisboa, Carris and Sociedade de Transportes Colectivos do Porto, have current interest rates of 112%, 106% and 103%, with others at 50% and 30% interest.

Ricardo Mourinho Félix said these sorts of interest rates charged by the bank to public companies have reached levels that anyone sane would consider "unacceptable," adding that there is nothing that can be done as the contracts have been validated twice in court in London.

The Budget and Finance Committee members resisted forecasting the future of the swaps contracts interest rates but they should reach at least 165%, and may well hit 200%.

Mourinho Felix, faced with repeated questions about the level of interest charged by the Spanish bank, admitted that "no normal human being thinks it acceptable to pay 200% interest" in any contract.

"These are not normal, these are not acceptable," said Mourinho Felix, adding that these swaps have been accruing interest on interest since 2009, with three of these contracts currently hitting more than 100% and they will continue to accrue interest in the coming years.

Mourinho Felix said that the former Finance Minister, Maria Luís Albuquerque, wanted to tear up the contracts:

"At the time, in an ill advised gesture, the Minister of Finance said publicly, with conviction, that she would rip up the contracts. And Santander Totta did what most sensible people would do: it announced that it was going to court to have the contracts validated, which it why it all ended up in London."

Maria Luís Albuquerque ordered that interest payments be halted, which caused more pain after the deals were judged valid in a London court and accumulated interest was added back into the amounts owed.

The swaps contracts will burden taxpayers until the last one runs out in 2027. Mourinho Felix told MPs that there currently is about €500 million interest due from 2013, plus a further €1.3 billion in future interest payments, until the bitter end of the contracts.

Asked whether he agreed to these extortionate interest rates, Mourinho Felix said he did not need a "sanity test," since "anybody mentally healthy knows that these rates are extremely high.”

António Vieira Monteiro, the chief executive of Santander Totta, was asked in April if he was comfortable with charging such high interest to Portugal's fiscally exhausted taxpayers.

Monteiro replied that this was not his role, "I do not have to be comfortable or not," he said, thus removing his name from many Christmas Card lists.

António Vieira Monteiro, possibly the greediest banker in Europe

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'Santander confirms that 'swaps' sky-high interest rates continue as before' (April 2017)

Comments

-1 #8 olly 2017-07-13 16:29

Quoting Ed:

Quoting Peter Booker:

You will have to put more pressure than that on Monteiro. His job is to maximise profits at his bank. Do you expect him voluntarily to give away his firm´s money? Why should he?

Maximise profits, yet, but not at all costs to the bank's reputation. The original deals were totally inappropriate for these-State owned businesses - we can see the downside which is unacceptable. Santander's salesmen knew this.

I don't know of any bank that has a "reputation" except a bad to terrible one anyway and Monterio's board would not let him do anything of the sort even if it was within his power because they would be facing a shareholders lawsuit.

0 #7 Beesely 2017-07-13 15:49

If interest rates had gone the other way these politicians would now be telling the voters how clever they were and how much they had saved the country by using swops but now they are crying foul because rates have been the wrong way for them for so long,the people who agreed to and signed off these swops must have been totally incompetent retards or on the take, probably both. When I was running companies that needed funding the banks and finance houses were always offering these swop options and we often used them but usually with cap and collars, i.e., very basically, we could only lose so much if interest rates went against us but we could only save so much if interest rates went for us, we were often offered "commission" to sign up to highly risky leveraged deals, the people who have agreed these high risk swop deals obviously took no such safeguards, they probably just took the "commission" but being taxpayer subsidised they knew that they could lose nothing personally by their cretinous, not to say criminal actions.

+3 #6 dw 2017-07-13 11:44

Banks control governments, own the big political parties, manufacture their own reputations through state and corporate media propaganda and are therefore above the law and untouchable. This is why although all the major international banks seem to be known criminal organisations, serial repeat-offenders, but get away with fines and carry on regardless.

+1 #5 Ed 2017-07-13 09:30

Quoting Peter Booker:

You will have to put more pressure than that on Monteiro. His job is to maximise profits at his bank. Do you expect him voluntarily to give away his firm´s money? Why should he?

Maximise profits, yet, but not at all costs to the bank's reputation. The original deals were totally inappropriate for these-State owned businesses - we can see the downside which is unacceptable. Santander's salesmen knew this.

0 #4 TT 2017-07-13 09:10

Quoting "no normal human being thinks it acceptable to pay 200% interest"- but we are talking bankers here. And politicians. Do either of those fall into the category of 'normal'?
Clearly what has happened here is the bank has out-smarted the government. Twice. And however hard they squirm, throw toys out the pram, etc., it looks like the politicians (therefore the Portuguese taxpayer) are stuck with it. Unless of course any (illegal) wrong-doing can be proved....

-1 #3 Ed 2017-07-13 09:07

Quoting Peter Booker:

When were these contracts signed, and who signed them on behalf of the Portuguese Government? And how are they being held responsible?

"Judge Blair concluded that when the contracts were signed between 2005 and 2007, during the José Sócrates government, everyone involved had reason to believe that the swaps contracts served the interests of the public companies and protected them from fluctuations and volatility in the financial markets." "Passos Coelho considered that these swaps were speculative, that managers of public enterprises should not have been allowed to sign them and that the swaps contracts were not in the best interest of the companies involved."
See: http://algarvedailynews.com/news/8150-portugal-must-pay-1-8-billion-in-santander-swaps-case-ruling

+2 #2 Peter Booker 2017-07-13 08:01

When were these contracts signed, and who signed them on behalf of the Portuguese Government? And how are they being held responsible?

You will have to put more pressure than that on Monteiro. His job is to maximise profits at his bank. Do you expect him voluntarily to give away his firm´s money? Why should he?

+4 #1 Laurinda 2017-07-13 01:40

This whole issue of swaps needs a proper investigation, because for any human being to agree to such rates of interest other incentives have to be part of the deal.

Time to make the individuals accountable and charged for the harm they did to the country and its taxpayers.

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