The newly appointed president of the European Commission, Jean-Claude Juncker, admitted today in Athens that the situation in Portugal "remains fragile," alluding to the case of Banco Espírito Santo.
Responding to a question on the situation in Portugal, posed during a press conference in the Greek capital, the new president of the European Commission said the situation "remains fragile and that we must be vigilant."
"We must remain vigilant ... across Europe, we can be affected by things we can not predict," warned Jean-Claude Juncker, alluding to the BES case that has rattled European markets.
The European Commission announced on Sunday night that a solution has been arrived at for BES, which includes the creation of a 'good bank' to hold any remaining healthy assets, and a 'bad bank' into which a pile of toxic assets has been shovelled.
The move is "in line with the state aid rules of the European Union," according to Juncker.
A later statement from Brussels read "in his review, he (Juncker) recognised that a disorderly resolution of the situation BES could create a serious disturbance in the Portuguese economy and the creation of the 'good bank' is appropriate to remedy the situation.”
The solution, according to the EC executive, aims “to restore confidence in the stability of the Portuguese financial system."
The BES solution was approved on Sunday after electronic signatures from the key members of the Council of Ministers were added to a document which was rushed to President Cavaco Silva for approval. A notice was to be found in the official gazette this morning.
The scheme set up by the Bank of Portugal to save Banco Espírito Santo was devised and approved in record time and it is unclear whether the Court of Auditors will review the decison at a later date to see if it works in favour of the taxpayer.
Thus, Novo Banco was created to hold the good assets of the old BES and to run its branch network which remains open for business. An immediate €4.4 billion will be lent by the state at an interest rate of 2.8%, to be reviewed every three months.
The Green party today led the criticism of the deal, "The Prime Minister of this country has continued to stick his head in the sand and hide under his towel, pushing the Bank of Portugal to the fore to provide information, in particular on the decision to use public resources, a matter which is not within the remit of the Bank of Portugal."
The Greens stated that "again it is public money that the government has used to plug the huge hole in BES generated by the criminal and fraudulent practices of its managers."
"The negative impact of the use of over €4 billion of the Rescue Fund for the re-capitalisation of the Novo Banco will, once again, be supported by workers, Portuguese households and small and medium enterprises in the country," says the Greens.
Question marks now hang over the head of the Bank of Portugal chief whose regulatory skills were found to be totally absent and whose comment that inter-company loans at BES group companies were hard to follow, may result in an early bath when the dust settles.
Auditors KPMG which gave the all clear for BES as late as July 2014 must be wondering which partners’ heads will roll and the members of the Espírito Santo family, led by Ricardo Salgado, will be checking their statements and devising a range of excuses to explain their roles in a bank where the scale of fraudulent activities has seen markets react far beyond Lisbon.
Ricardo Salgado issued a statement today through his lawyer and said he would explain the ‘sharp fall’ in the BES share price when the "time and context" is right.
In his statement, the former BES president says he awaits the report of the audit that is to be released by the Bank of Portugal and PwC.
The former President of BES, arrested and questioned last week in the Monte Branco money laundering enquiry, and certainly the focus of blame over the collapse of BES, stated that he "reserves the right to comment" when the audit is released.
"When the time and context allow an objective and calm analysis of what precipitated the abrupt fall in the value of BES and the consequent intervention of the state," at that time, "Dr. Ricardo Salgado will pronounce on what, in his view, caused this crisis and its outcome," reads a statement sent to media which reaches new levels of self-delusion and pomposity - still no apology then…
The Finance Minister Maria Luís Albuquerque was interviewed on Monday evening on SIC and said that the Novo Banco will be free of "any liabilities or contingencies arising from willful misconduct, fraud, regulatory violations, and criminal or administrative offences."
"Potential claims and proceedings brought about by fraud will be handled by the bad bank which now incorporates offshoots in Angola, Aman and Miami. Another, as yet unpublished, condition is that family members or others who have been complicit in acts of illegal management will be unable to access funds."
Albuquerque will appear in parliament on Thursday to provide information to MPs about the BES collapse and subsequent rescue.
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For a first class summary of the BES affair from mindfulmoney.co.uk, see:
