Banco Espírito Santo went bust in August 2014, some 1,172 days ago, but instead of letting the business collapse, the Bank of Portugal’s answer was to create a ‘bridge bank’ which it called Novo Banco, loading it with the ‘good’ assets of BES and issuing a mandate that the squeaky clean new business must be sold within three years
"The sale of the New Bank to Lone Star with a capital injection of €750 million is completed and, by the end of this year, a new entry of €250 million, which means the entry of €1 billion," announced the governor of the Bank of Portugal, Carlos Costa.
The sale is a transfer of 75% of the company’s shares to Lone Star’s vehicle Nani, with the remaining shares retained by the Resolution Fund which was largely funded with of over €3 billion in State loans as the Fund did not have enough reserves. This loan from unwitting taxpayers is having to be paid off over several decades so as not to upset the financial system.
After the first, failed attempt to sell the bank - Chinese bidders had not offered enough at just over a billion euros - a new contest was launched and the prize later awarded to a US vulture fund, 'Lone Star' from Texas.
Novo Banco was awarded to the Lone Star fund after higher bidders had been kept at arm’s length by the Bank of Portugal which seemed keen to deal only with the Americans.
The European General Directorate of Competition has decreed that the State, aka taxpayers, can be called on to inject more money if Novo Banco faces serious difficulties in the future and its capital ratios fall below a certain (secret) value.
At the signing ceremony at the head office of the Bank of Portugal, the head of Lone Star for acquisitions in Europe, Donald Quintin, unsurprisingly assured the media that Lone Star "is confident in the future of the Portuguese economy and in Novo Banco."
The Bank of Portugal Governor, Carlos ‘Mr Magoo’ Costa emphasised that with this operation, Novo Banco is "endowed with the necessary means for its business plan that guarantees the maintenance of the bank's relevant role in financing the economy," and then tried to defend his decision of creating the bank in the first place:
"The objective of the BES resolution now has been fulfilled. The continuity of most of the bank’s activity was ensured, depositors did not suffer losses, and the capacity to finance companies and families was preserved."
Many depositors that were duped into switching their guaranteed deposits into high-risk associated company bonds will not agree with Costa’s carefully selected words, designed for a breezy sound-bite while hiding the appalling and fraudulent way that BES was managed under the myopic regulatory eye of the Bank of Portugal.
In the great Bank of Portugal give-away, any future court decisions that trigger compensation payments over the collapse of BES will be, as usual, the responsibility of the Resolution Fund which already owes taxpayers €3 billion from when Novo Banco was set up.
In addition to agreeing not to sell Novo Banco for three years, Lone Star also agreed not to distribute dividends for five years, and agreed not to do business with Lone Star associated companies.
Carlos Costa added that today’s signing is an important milestone for the Portuguese financial system, "which is more prepared to provide financing to the Portuguese economy,” despite Portugal’s large companies sourcing funds from mature, northern European financial markets which, they say, are swifter, less bureaucratic and offer better terms.
So, the Americans get 75% of a huge business and the taxpayer, still waiting for a promised return on an investment of €3.9 billion, walks away with zero. The Resolution Fund with its 25% apparently worth €0.333 billion is backed by a loan of €3.9 billion, somethings will never add up.
The new majority shareholder of Novo Banco held an immediate meeting to approve amendment to the statutes and approve appointments
In a statement to the Securities and Exchange Commission (CMVM), the bank stated that the amendment comprises changes in the management and supervision structure of the New Bank, which is now composed of a General and Supervisory Board, a Board of Directors Executive Management and an Auditor.
Who will be running Novo Banco?
The General and Supervisory Board will be led by Byron Haynes, while Antonio Ramalho will serve as Chairman of the Executive Board of Directors.
The General and Supervisory Board has as Vice-President Karl-Gerhard Eick and as members Donald John Quintin, Kambiz Nourbakhsh, Mark Andrew Coker, Benjamin Friedrich Dickgiesser, John Herbert and Robert A. Sherman.
In turn, the members of the Executive Board of Directors are Vítor Manuel Lopes Fernandes, Jorge Telmo Maria Freire Cardoso, Isabel Maria Ferreira Possantes Rodrigues Cascão, Luísa Marta Santos Soares da Silva Amaro de Matos, Rui Miguel Dias Ribeiro Fontes and José Eduardo Fragoso Tavares of Bettencourt.
The General Assembly is presided by Nuno Azevedo Neves, Vice-President Bruno Azevedo Rodrigues and Secretary Ana Isabel Vieira.
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To read how the taxpayer yet again has been the fall guy, courtesy of the bank of Portugal, read: 'The Novo Banco saga has been one of misrepresentation and woe'
