Not content with spending €15 million hiring BNP Paribas to advise on the creation and sale of Novo Banco, the Bank of Portugal also has contracted to spend up to €800,000 for independent advice and assessment from TC Capital in London.
Both financial companies have been hired by direct private contract without the Bank of Portugal asking for competitive quotes and without any supervision as to the suitability of the appointees.
The explanation of the TC Capital contract is to be found on the government website that lists public contracts so as to promote transparency.
The €800,000 listed is for ‘Project Hermes’ with no further explanation and certainly no mention of the fact that the boutique consultancy with one employee is working on Novo Banco.
When pushed by national media, the Bank of Portugal confirmed that the contract was related to the forthcoming sale of Novo Banco and was for an External Senior Assessor for the project.
"In addition to BNP Paribas, the Bank of Portugal contracted TC Capital as a financial advisor in the sales process of Novo Banco."
The Hermes contract is for a monthly payment of €30,000 with further payment dependent on the success of the work to a ceiling of €500,000.
In all, the value of the contract is €800,000 of public money with no explanation as to the work to be done, no tendering process which beraks the procurement code for public entities, and no way now of being able to judge if the state and the taxpayer is getting value for money.
The contract was posted on the government website on May 15, 2015 but was signed on April 7, 2015. If fact the work started in October 2014 without a signed contract being in place.
TC Capital belongs to Phillipe Sacerdot, a former Deputy Director of UBS Investment Bank who is well known to António Varela, a deputy governor of the Bank of Portugal who also worked in Lisbon for UBS Investment Bank from 2000-2009, initially as executive director and from 2007 as managing director.
Who signed the contract with TC Capital? António Varela, without following the procurement code requiring quotes for contracts of over €75,000. The Bank of Portugal said that the contract was 'urgent' yet work was started two months after the collapse of BES and the contract was not signed until 9 months had passed.
If the Bank of Portugal is not prepared to be follow the procurement rules for public bodies and be open about contracts, the media will continue to point out poor practices and the public can make up its own mind.
The regulator who failed to regulate
This slipshod attention to the rules, the appointment of chums and the failed attempts to cover the trail, leaves the Bank of Portugal open to yet more sharp criticism that can be added to a long list of failures by its governor Carlos Costa.
The news that Costa has accepted an offer to remain in post for another term of office has sent a wave of disappointment and incredulity through Lisbon and the international financial community.
Costa's re-appointment simply is astonishing and shows the Prime Minister and Minister of Finance, who extended the offer, as blind to Costa's poor job performance and to the impact his ineptitude will now have on their own image as the self-proclaimed defenders of probity and open government.
The government says that Costa is the best man to sort out the various problems in the Portugal's banking system but as he has been partly responsible for creating many of them through his lack of ability, his re-appointment is all the more questionable.
Costa's cozy relationship with Ricardo Salgado, his inept handling of BES and its inevitable collapse last August due primarily to a lack of regulation, followed by his evasion of responsibility for the 2,500 bondholders of worthless commercial bonds sold through BES branches as 'safe investments' is not the performance required of a regulator.
