Politically driven past decisions to sell or bail-out Portugal’s failing and failed banks had saddled taxpayers with long-term obligations that successive governments must account for in the annual State Budget.
Remember BPN? It is a bank that no longer exists but is still going to cost taxpayers €641 million next year. More recently, there’s Banif which was sold to Santander Totta but somehow will cost taxpayers €372 million in 2018.
Even the defunct BES, whose progeny Novo Banco already has set us back €3.9 billion, will cost Portugal’s hard-pressed taxpayers a further €3.6 million next year.
These three major bank failures of the last few years - BPN, BES and Banif - will cost us more than €1 billion in 2018 as taxpayers continue to underwrite losses while funding the running costs of the financial businesses set up to sell off remaining assets.
The red ink for the year we are in is €759 million, which is bad enough, but next year’s increase to over €1 billion is a shameful result of those hasty decisions made by politicians.
Finance Minister, Mário Centeno, is responsible for the 12 financial vehicles that inherited toxic, problematic and difficult assets whose managers are meant to turning those assets into cash. The big one of the three is BPN which was hastily nationalised when José Sócrates was prime minister.
BPN was run for the benefit of its crooked management and went bust in 2008, triggering a State bailout, on the grounds of "avoiding a potentially serious financial crisis in the Portuguese economy," that so far has cost the public purse well over €3 billion.
The bank was sold to the Angolan Banco BIC in 2011 for just €40 million after the government threw €1.8 billion at the problem instead of letting the institution go under.
The government claims that the long, slow process of shifting these dud assets costs money to pay for the services of financial and legal advisors and companies specialising in real estate management and disposal.
This, apparently, is the way to maximise value - or at least minimise the losses to taxpayers who did not ask for these liabilities and would have been happier has the banks gone bust and shareholders alone had suffered.
For BPN alone, the 2018 budget foresees expenditure of €64.3 million for Parparticipadas (the holding company that manages the shares that BPN held in other companies); €161.7 million for Parups (which manages real estate, works of art, coin collection and various financial instruments) and a further €415.3 million for Parvalorem (the fund with the problematic BPN loan portfolio).
The case of BPN was particularly serious because of its size, market share, and the political implications. Portugal's then President, Cavaco Silva, and many of his political allies, maintained personal and business relationships with the bank and with its president, José Oliveira e Costa who in May this year was sentenced to 14 years in jail.
Some income from asset sales would be a pleasant surprise but the debit side of this State sponsored balance sheet normally costs taxpayers €400 million to €600 million a year, with no end in sight, to the delight of a host of highly-paid advisors.
The 2016 loss caused by this scheme quietly will be revealed by the Court of Auditors in December, while Portugal’s taxpayers prepare yet again to support the work of corrupt bankers and scheming politicians through 2018 at a further cost of €1.017 billion.
