Action group sues Bank of Portugal Governor

The Bank of Portugal governor Carlos Costa, and the Portuguese state are being sued for gross negligence over the BES affair as, investors allege, they knew the bank was in a parlous financial state, yet exhorted the public to continue to invest in BES shares and bonds.

To add insult to financial losses the Bank of Portugal slyly told institutional investors to offload investments in BES while encouraging private investors to pile in as all was safe and secure.

The rest was history of course as the bank collapsed and had to be rescued by a massive cash injection which left buyers of BES shares and investment products suffering catastrophic losses which, the 485 investors in the action group claim, could have been avoided if the Bank of Portugal governor had done his job.

The action group's claim in the Lisbon court cites supervisory failings which led to the bank sliding under the waves while the regulators kept quiet about the scale of BES’s problems.

Carlos Costa described a ‘safety cushion that would accommodate even the worst case scenarios’ to assure people that all was well while the reality was devastating, leading to one of Portugal’s oldest businesses and largest banks going bust.

The groups claims that the financial interests of its members were severely damaged by breaking up of BES and the transfer of its assets to the ‘good bank’ Novo Banco in a move that it sees as illegal.

The statements by the Bank of Portugal and assurances by its governor served to fool the private market into buying in to BES bonds at a time when the governor was working on a rescue package that wiped out shareholder and bondholder value in August last year.

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