CGD fallout could “damage Portugal’s economic reputation” says Moody’s

The US ratings gency Moody’s has warned this week that the negative overseas perception of Portugal’s banking system generated by the Caixa Geral de Depósitos scandal could “damage Portugal’s economic reputation.”

The agency which today is evaluating Portugal sovereign debt and has been more optimistic about its economy lately, told the online business news service ECO that her banking system was vulnerable but still stated that the country’s economic outlook is positive.

At a time when investors are now nervously looking at Italy, Moody’s is more optimistic but says Portugal is not yet out of the woods.

The Portuguese’s banking system’s amount of Non-Performing Loans (NPL) continues to be a heavy load on the Portuguese banking system, while the EY audit into the financial management of public bank Caixa Geral de Depósitos (CGD) could end up weighing heavily on the bank with the attendant fallout damage.

“The audit relates to the management by management teams at the bank. We are monitoring any type of implication that this could have from an economic or reputation point of view”, says Pepa Mori, vice-president the person who is in charge of evaluating Portuguese banks”, she said on the sidelines of the agency’s annual meeting held in Lisbon.

The EY audit pinpointed 46 loans granted between 2000 and 2015 which resulted in CGD losing around €1.2Bn.

The Bank of Portugal is currently is seeking to apportion responsibility and has pointed to nine of the 44 managers who worked at the bank during this period and has called into question the position of current Governor of the Bank of Portugal Carlos Costa who had been a former director at the public bank.

Carlos Costa has sought exemption from the parliamentary enquiry into the losses on the grounds that he was involved in CGD’s marketing strategy at the time and not sanctioning loans.