PORTUGAL: Portugal's central bank rescues troubled lender Banco Espirito Santo in a 4.9 billion euro recapitalisation

Record ID: 565522

  • Title: PORTUGAL: Portugal's central bank rescues troubled lender Banco Espirito Santo in a 4.9 billion euro recapitalisation
  • Date: 4th August 2014
  • Summary: LISBON, PORTUGAL (AUGUST 3, 2014) (REUTERS) BANK OF PORTUGAL GOVERNOR CARLOS COSTA ENTERING ROOM PHOTOGRAPHERS (SOUNDBITE) (Portuguese) BANK OF PORTUGAL GOVERNOR, CARLOS COSTA, SAYING: "The Bank of Portugal decided today to apply to BES a resolution measure. Most of the activity and the assets of BES will be transferred to a new bank, called 'Novo Banco', properly capitalized, and purged of problematic assets." COSTA READING STATEMENT (SOUNDBITE) (Portuguese) BANK OF PORTUGAL GOVERNOR, CARLOS COSTA, SAYING: "In this way, and as a consequence of the decision, it completely and without a doubt puts aside, any chance of there being losses for depositors." COSTA READING STATEMENT (SOUNDBITE) (Portuguese) BANK OF PORTUGAL GOVERNOR, CARLOS COSTA, SAYING: "The capital of the 'Novo Banco', which amounts to 4.9 billion euros, is completely owned by the resolution fund." PHOTOGRAPHERS (SOUNDBITE) (Portuguese) BANK OF PORTUGAL GOVERNOR, CARLOS COSTA, SAYING: "The solution adopted by the Bank of Portugal, had as its biggest concerns, to preserve financial stability and the interests of depositors. I would add, since it is a bank with great importance for small and medium enterprises, to assure the continuation of the financing of the economy. The solution is also the one which best protects the interests of public funds, and ensures the maximum accountability of the institutions' shareholders." ESPIRITO SANTO BANK ( BES ) HEADQUARTERS IN CENTRAL LISBON VARIOUS OF ESPIRITO SANTO BANK ( BES ) HEADQUARTERS EUROPEAN UNION, PORTUGAL AND ESPIRITO SANTO BANK FLAGS ON TOP OF BUILDING VARIOUS OF ESPIRITO SANTO BANK ( BES ) HEADQUARTERS IN CENTRAL LISBON
  • Embargoed: 19th August 2014 13:00
  • Keywords:
  • Location: Portugal
  • Country: Portugal
  • Topics: Economy,Politics
  • Reuters ID: LVA7A6RY8YF93LMNASI4Q6FR1FLQ
  • Story Text: Portugal's central bank said on Sunday (August 3) it decided to rescue troubled lender Banco Espirito Santo in a 4.9 billion euro recapitalisation to be pumped into the healthy part of the bank that will be separated from its compromised assets.
    "The Bank of Portugal decided today to apply to BES a resolution measure. Most of the activity and the assets of BES will be transferred to a new bank, called 'Novo Banco', properly capitalized, and purged of problematic assets." Bank of Portugal Governor Carlos Costa told reporters.
    "In this way, and as a consequence of the decision, it completely and without a doubt puts aside, any chance of there being losses for depositors." Costa added.
    Current shareholders in BES and holders of subordinated debt will be responsible for the risks in the "bad bank" mainly associated with the crumbling business empire of the bank's founding Espirito Santo family.
    "The solution adopted by the Bank of Portugal, had as its biggest concerns, to preserve financial stability and the interests of depositors. I would add, since it is a bank with great importance for small and medium enterprises, to assure the continuation of the financing of the economy. The solution is also the one which best protects the interests of public funds, and ensures the maximum accountability of the institutions' shareholders."
    The money comes mostly from the country's international bailout, which had a 6.4 billion euro line available for bank recapitalisation, via a bank resolution fund set up by Portugal in 2012, Bank of Portugal Governor Carlos Costa said.
    The scramble to save Portugal's largest-listed bank by assets comes after BES last week posted a deeper than expected 3.6 billion euro loss and said it was exposed even more deeply than originally thought to a cascade of bankrupt companies belonging to its founding Espirito Santo family.
    Those disclosures, and the announcement that authorities were looking into possible illegal activity at the bank, have scared away investors ahead of a planned capital increase by BES over the next few weeks.
    After a tumultuous week in which BES shares lost 75 percent of their value, authorities at the government and Bank of Portugal realized that using public funds was the only solution for now, people familiar with the authorities' thinking said.
    Portugal exited its 78 billion euro international bailout in May, and still has 6.4 billion euros from an original 12 billion euro bank recapitalisation line received under the programme.
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