The €4 billion hole in the accounts of Banco Espírito Santo Angola is to be investigated by the Bank of Portugal which will focus on the bank's exposure under the management of the former chief executive Ricardo Salgado.
The missing millions at BES and its Angolan subsidiary, BESA, will be the big issue as the regulator looks at Salgado’s actions and activities to see if and where offences have been committed.
The Bank of Portugal will open this process in the coming days and will question whether there was mismanagement of the banking group by the controlling families and whether their actions led to the exposure of the financial group and its customers. This should not take long, even for the Bank of Portugal which is deeply implicated in its lack of regulation of the whole Espírito Santo Group.
BES owned 55,71% of BESA and the Bank of Portugal wants to understand why BES gave so much liquidity to its subsidiary, which eventually led to the collapse of BES and the need to recapitalise it as Novo Banco.
The Left Bloc is pushing Portugal Telecom for the report by an internal audit committee about the huge loans it habitually made to Espírito Santo companies such as Rioforte, leading to the eventual default on a €900million Rioforte bond due to its insolvency.
The Left Bloc today requested access to government documents and documents from auditors and the regulator concerning Banco Espírito Santo and the Espírito Santo Group as part of a new parliamentary inquiry into the whole affair.
In the letter addressed to the committee chairman, Left Bloc MPs requested, "all exchanged correspondence, including emails, between the auditor (KPMG) and the regulators (Bank of Portugal and Commission of the Securities Market Commission (CMVM) in the Espírito Santo file" as well as correspondence between the Bank of Portugal and the Commission of the Securities Market Commission (CMVM).
Not content with the above request the Bloquistas led by Catarina Martins and João Semedo want to see copies of all the information exchanged between the Government and the regulators, including the resolution to save BES by dividing the bank into a ‘good bank’ and a ‘bad bank’.
As if this is not enough, the MPs want to see various reports, audits and letters exchanged with European entities and details of the current assets and liabilities of state bank Caixa Geral, Novo Banco and the old BES 'bad bank'.
Minutes of all the BES board meetings since 2007 complete the request, for the time being.
The parliamentary commission of inquiry was sworn in last week and names have been selected of those the commission wishes to grill.
Regretfully the commission has seven PSD members on its board including the Chairman, outweighing the socialists with five, and the CDS and PCP two each and the Left Bloc only one.
The commission may chose to look at the various ministerial announcements leading up to and following the BES collapse such as the Prime Minister’s July 11th classic,
“BES can guarantee the savings of its customers and there is no reason for state intervention."
The day after the August collapse and rescue of BES, Passos Coelho again tried to assure the public,
"The solution for BES is the best way of protecting the taxpayers.” “'What we have had in the past and should not return to again and again, and this will not be repeated, is that taxpayers are called on to pay for problems that were not created by taxpayers."
Passos Coelho refers specifically to the Banco Português de Negócios bailout in 2008 after the discovery of bad management and malpractice related debts of €1.8 billion. In 2011, BPN, neatly stripped of many of its debts and bad loans, was sold to Angola’s Banco BIC for €40 million. The taxpayer picked up the tab for the difference.
By dividing BES into good and bad the government shows again that it has decided to penalise taxpayers should there be losses related to the BES bailout.
EU law says that all creditors should be called to account in these circumstances but the Passos Coelho government decided to protect a few, big investors while exposing the taxpayer to losses.
Whether the parliamentary enquiry will achieve anything concrete remains to be seen but the disgrace of Salgado and the ruling families may yet have a few more fathoms to sink.
