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International investor confidence shaken by Bank of Portugal governor

ftThe Financial Times has joined in the rising clamour surrounding the Bank of Portugal’s governor whose recent series of actions have caused international opprobrium, with overseas investors’ trust in Portugal at a depressing and avoidable low.

The recent stripping of investors of €2 billion in bonds held by Novo Banco has affected the principle of equal treatment of debtors, has left large institutions such as Pimco hundreds of millions out of pocket and has left another group of individuals without their life savings.

Pimco, one of the largest asset managers in the world, has compared Portugal to Venezuela, accusing the country of "confiscation" and has promised legal action to recover its investors’ money from Portugal, i.e. from the taxpayer - yet again.

The European Central Bank, when asked about the Bank of Portugal’s move, said it was down to the Bank of Portugal, as did the Portuguese government which has "difficulties and concerns" and is trying to put as much space as possible between itself and the bank’s governor Carlos Costa who now is seen as a ‘dead man walking.’

Costa’s blunder was thinking that it was only big institutions that would suffer his €2 billion vanishing act but individual clients are grouping together that have lost over €60 million, some have lost their life savings in a near repeat of the ‘BES-deposit-account-to-valueless-shares' scandal dreamed up and actioned by BES chief laundry man Ricardo Salgado as his empire of the sun was extinguished by a flood of red ink.

Portugal former Prime Minister Pedro Passos Coelho said that Carlos Costa’s actions have “undermined the trust of foreign investors" and few now disagree.

The Canadian rating agency DBRS has warned, rather politely, that the decision by the Bank of Portugal over the Novo Banco bonds may bring "increased risks" and "impact on investor sentiment and confidence in the Portuguese banking system."

The rating agency warns that the decision to strip investors of €2 billion, to make Novo Banco more saleable, may hamper the full return of Portuguese banks to the international lending markets because there now is a weakening of investor confidence causing higher funding costs which in turn will affect profits.

Add to this the Banif bailout fiasco, where Carlos Costa rushed through a deal that is eye-wateringly expensive for the taxpayer, and things are not looking good for the embattled governor.  

It is not just Carlos Costa’s actions that are causing international eyebrows to rise and hover.

The government is not helping sentiment as it aims to take TAP back into public ownership, and scraps PPP funding arrangements for transport facilities in Lisbon and Oporto.

All of which have made Portugal look unreliable, unfair, arbitrary and not a sound place in which to invest.

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-2 #3 dw 2016-01-16 10:42
If Portugal is being compared to Venezuela for daring to stand up to the international financial mafia maybe that´s a good thing. Who are these individuals who have supposedly lost their life savings? I bet they are nigh net worth investors with diversified portfolios and are far from penniless.
0 #2 Debby 2016-01-15 20:55
What has been asked many times by north Europeans is why anyone thought Portugal was ready to be in the European Union. Without the sort of scrutiny that Greece is currently going through. Each economic sector being vetted by developed EU countries - checking for ease of access, full and fair implementation of regulations; access to investment and employment opportunities. So much is still entirely lacking here.

Everything that bubbles to the surface of this sewer just emphasises that Portugal was not ready then - 30 years ago - to be in the EU ... and still isn't.
+1 #1 charly 2016-01-15 19:11
It's unbelievable : everybody knows that the governor is not capable to manage the National Bank of Portugal !
Why are they keeping this debile in function ???? Or might there be "a good Portugese reason" ?????

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