BES 'should have been nationalised'

BPI's Fernando Ulrich said that the nationalisation of the renamed and bailed out Banco Espírito Santo, Novo Banco, is a far better idea than selling the bank at a loss, a move that will affect the entire banking sector.

Banco Português de Investimento’s chief executive Ulrich added that if Novo Banco is sold at a loss, as his bank supplied part of the funds needed to rescue BES, he will sue the government as will the other banks affected.

The possibility of a future buyer of Novo Banco having to face several protracted court cases arising from the murky circumstances surrounding the BES rescue may well scare away potential buyers, according to the banking chief who also is one of those potential buyers of Novo Banco when it is released for sale.

Aligning himself with the Communist Party’s stated approach, Fernando Ulrich said that nationalisation has many advantages, and he remains critical of the Bank of Portugal’s unilateral decision to bail out BES using a support fund top-up paid for by eight of Portugal’s main high street lenders.

The Ulrich view, which is gathering support from industry colleagues, is that the Government should have nationalised Banco Espírito Santo as this clearly would have been the ‘least risk’ option and would not have put the country’s other banks at the risk of substantial losses.

The banker was speaking on SIC Notícias ‘Squaring the Circle’ programme and said, "Now I'll be very selfish and push my own bank’s interests. I prefer the solution from the Communist Party, which was the nationalisation of the bank, it would have been better for us." With nationalisation, "the other banks would not have such a huge exposure to a loss which could be very significant," in the event of the bank being sold at a loss.

Fernando Ulrich warned that Portugal’s banks are likely to go to court if their losses due the bailout are high. "It's a very sensitive issue," he acknowledges. If the damage is high, the banks will be forced "to litigate with the state and the Bank of Portugal."

Ulrich had praise for Novo Banco’s new chief executive, Stock da Cunha and his team, but confessed to being worried about the "aggressive campaign" by the bank to attract deposits, advising that given the state of Novo Banco’s accounts, the current management" should be focused on selling off assets."

Banco Português de Investimento’s  and Santander Totta are two of the banks touted as being candidates to buy Novo Banco when finally it is put on the block.

If Urich’s BPI is accepted at a buying price that shows a loss for those that bailed out BES, he will be in the bizarre position of suing the government for the losses BPI will have made, despite having paid under the odds for the assets of Novo Banco.

It is not just the high street banks that are set to make losses when, as is almost certain, BES is sold.

The insolvent bank run by Ricardo Salgado was rescued with a total of €4.9 billion, most of this ultimately is taxpayers’ money but eight of Portugal’s main banks were forced to chip in €700 million, namely CGD, BCP, BPI, Santander Totta, Crédit Agricole, Montepio, BIC and Banco Popular.

The Bank of Portugal decided on a bail out for BES mainly due to its own failure as a regulator having not acted on information it had in December 2013 indicating that the financial reporting from BES was less than honset and open.

BES then declared the biggest loss in Portugal's banking history.

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