Portugal's stock market regulatory body suspended share trading in Banco Espírito Santo today, until "the release of relevant information," which has yet to be released.
Fears for the future of Banco Espírito Santo generated a wave of selling across European stock markets and made headline news in the Financial Times, Wall Street Journal, CNBC and Bloomberg.
BES shares again had fallen sharply in trading before the announcement which followed an earlier announcement by Espírito Santo Financial Group, BES’s largest shareholder, that it had suspended its own shares in both Lisbon and Luxembourg, as well as bonds issued by one of its subsidiaries.
The Financial Times wrote that "fears in banking in Portugal generates a sell off in Europe."
In the statement to the regulatory body, Espírito Santo Financial Group explained that its decision to suspend its own shares was taken due to 'current material difficulties,' especially at its largest shareholder, Espírito Santo International.
Fears about the financial viability of Espírito Santo Financial Group had grown on reports that Banque Privée Espírito Santo, another group company, had been unable to pay back some of its clients who held debt-related investments.
CNBC.com noted that "worldwide markets sink on fears about the stability of the banking sector in Portugal and fears about the growth of the U.S. economy."
Diário Económico reported that Espírito Santo International directors are deciding whether to declare the company insolvent, which looks inevitable unless its main creditors agree a rescue plan.
The Left Bloc in parliament today said the situation at the Espírito Santo Group "could destroy the financial system."
"We do not think the situation is normal. We don’t think it normal to accumulate a financial hole of €7.7 billion and then to be told that all is well and everything is under control. We have here the result of activity that could destroy the financial system and we are told everything is going well, " said the parliamentary leader of the Left Bloc, Pedro Filipe Soares.
Credit rating agency Moody's slashed its rating for Espírito Santo Financial Group to Caa2 from B2, citing an increase in credit risk related to Espírito Santo International and Rioforte, another bombed out group company.
BES shares today dropped by over 17% before suspension and banks in Portugal and Spain took a beating, as did shares in financial institutions in France, Germany and the U.K. all down over 2.5%.
Collateral damage was seen at Portugal Telecom, down 6.8% in one day, which has exposure of an unexpected €879 million in Rioforte bonds, as arranged by BES in a cosy deal which came as a shock to two PT directors who resigned on hearing the news. PT now is valued at the lowest price in its history with its shares having fallen 35% since the BES scandal started.
Soon to be BES boss, Vítor Bento, left an unscheduled meeting at the Bank of Portugal this morning and said to reporters, "I have nothing to say, I'll speak when I have something useful to say."
Not a word from Ricardo Salgado, the outgoing BES boss whose reign has seen the family dynasty lose control of their bank, billion euros debts hidden in the accounts since 2008, questions about off-shore companies that he controls, the involvement of BES in the Monte Branco money laundering investigation, the involvement of BES in the Ferrostaal submarine bribery case, with more no doubt yet to surface.
Comments
perhaps they should run their own businesses better