Portugal's Prime Minister now admits that any Novo Banco loss will have to be borne by the financial system; the Left Bloc’s Catarina Martins argues that this means the taxpayer.
The PMs admitted that losses from any sale of Novo Banco at a price below €4.9 billion will be borne by the financial system through Caixa Geral, the state shareholder.
"If losses come into existence they will have to be supported by the financial system. The state owns a bank, the largest Portuguese bank, if there are losses then Caixa Geral will be affected," said Pedro Passos Coelho, reluctantly following yesterday’s admission by his Finance Minister Maria Luis Albuquerque that, far from being a matter that has nothing to do with the public accounts, the bailout of BES will indeed result in losses to the state if the sale price of Novo Banco is below the amount shovelled into the new bank.
Both politicians spent August and September saying that there would be no losses for taxpayers when Novo Banco is sold but this will only be the case if the bank is sold at a price in excess of the bailout payments.
Refusing to speculate on the outcome of the forthcoming sale of Novo Banco, Passos Coelho patiently explained that when it is sold only then can we see the profit or loss.
Yesterday, Fernando Ulrich, the Chief Executive of Banco Português de Investimento (BPI), said that it was unlikely that a price in excess of the bailout amount would be achievable for Novo Banco, thus a degree of loss is inevitable.
Meanwhile the governor of the Bank of Portugal confirmed that the central bank has lodged a criminal complaint against former directors of Banco Espírito Santo.
The complaint has been submitted to the Public Ministry against the BES administration headed by Ricardo Salgado, on suspicion of fraudulent activity.
The complaint is being followed up by the Central Bureau of Investigation and Penal Action and was presented by the governor in mid-September, based on "data obtained in the course of the forensic audit of BES," an audit that continues.
The main target is Ricardo Salgado who was the chairman of the executive committee, and Amilcar Pires, the director responsible for finance at the bank.
Governor Carlos Costa was explaining the current situation with BES to the Budget, Finance and Public Administration parliamentary committee today where he praised the work of the management team under Vítor Bento who had been brought in to sort out Novo Banco.
Bento left after a couple of months and Carlos Costa said that the Bank of Portugal had fully supported Bento, but Bento has felt that he could not continue and "amicably agreed with the Bank of Portugal to exit." This of course is nonsense. Bento left because Carlos Costa undermined his authority by seeking immediate buyers for Novo Banco while telling Bento that buyers would only be sought in the medium term.
Costa said the forensic audit of BES should be completed soon, despite the difficulties that have been found relating to opaque transactions and a lack of cooperation from overseas jurisdictions.
This enquiry was not expected to be easy and a lack of cooperation can be expected by those whose security depends on hiding the truth.
Soon, MPs will have a chance to run their own investigation into the collapse of BES, the start of which was announced by parliamentary president Assunção Esteves this week.
MPs have until October 19 to draw up a list of people to question and must complete the report within 120 days.
