Call for public Novo Banco audit

 In Banks, Consultancy, News

Portugal’s audit office says that it is prepared to carry out a fresh audit into Novo Banco if required to by parliament.

The offer from the Tribunal de Contas (audit office) comes after the head of the left-wing Bloco Esquerda party Catarina Martins suggested an audit should be undertaken by a public commission comprising the Bank of Portugal, the General Institute of Finances and the TC audit authority.
In an interview with Expresso, Catarina Martins argued that the “State should not pump more money” into Novo Banco “until another audit is carried out and one not by Deloitte” which handed an audit to parliament at the beginning of the month.
Portugal’s audit office, the Tribunal de Contas (TC) told ECO online news that it has the competencies to undertake such an audit according to a source within the institution which is led by Vítor Caldeira.
According to the Law for the Organisation of the Tribunal de Contas, ‘Entities of any nature that have public capital or are beneficiaries of public capital, any shares or monies or other public monies considered for the public good, can be subject to financial scrutiny by the Tribunal de Contas in order to legally supervise, regulate and economically and financially correct the application of the same public funds and safeguard public interests.’
Novo Banco has already received €3Bn from the Resolution Fund which was set up with the collapse of Banco Espírito Santo (BES) in 2014 when accounts and funds were transferred to what was supposed to be a ‘good bank’ with salvageable assets, customers’ accounts and loans, retaining BES as the ‘bad bank’ with toxic assets and non-performing loans.
The money from the fund has been financed from levies from Portugal’s other banks and from cash injections from the State Budget; i.e., the tax payer.
According to the contract signed with US vulture fund Lone Star, the fund can receive a further €900 million. But the Bloco de Esquerda rejects that possibility because it believes that the sale of assets, including property portfolios, were sold on the cheap, resulting in high losses for the bank and therefore the tax payer.
It is a suspicion that has not be allayed by the publication of the Deloitte audit and could put a stop to further funds being injected into the bank which, says the left-wing party, could compromise Portugal’s public deficit and future investments in the public health service.
Catarina Martins said the contract with Lone Star should be revoked, but this can only be done with solid proof of reckless mismanagement of public assets.
The Tribunal de Contas makes clear that such an audit, which would be of a legal nature and therefore legally binding, could be carried out on its own initiative or if requested by the Portuguese parliament.
The Deloitte audit into the bank’s finances and management of the same has been strongly criticised from all sides because it left more questions than answers.
It was already known that the origin of the bank’s problems was mainly related to BES, with Deloitte quantifying the losses of this inheritance at over €4 billion. However, doubts remain as to what happened after the resolution, notably after the bank’s sale to the Lone Star Fund in 2017.
Deloitte’s audit examined the bank’s management actions in the period 2000 to 2018. Samples of three types were selected: credit transactions (201 transactions); subsidiaries and other associated companies (26 transactions); and transactions with other assets, namely securities and real estate (56 transactions).
The period of analysis covers several administrations: Ricardo Salgado (2000-2014), Vítor Bento (2014), Eduardo Stock da Cunha (2014-2016) and António Ramalho (2016-present).
According to the Ministry of Finance, the audit report revealed net losses of €4.042Bn euros in Novo Banco, mostly from BES, i.e., when the bank was managed by Ricardo Salgado.
With 201 credit operations, the bank recorded a loss of €2.320Bn. Operations with other assets resulted in losses of €1.234Bn, while subsidiaries and associated companies generated losses of €488 million.
This was one question raised by the deputy of the Left Bloc (BES), Mariana Mortágua: there are no names of the debtors who have caused the bank losses of over €2Bn. In this regard, she believes that the report should be released immediately.
“The Parliament still does not know, when analysing credit operations carried out by BES and Ricardo Salgado, who were the clients who benefited from these credit conditions. Today, because of other committees of enquiry, we can guess who they are,” she said recently. “They are operations linked to BCP, to Portugal Telecom and even linked to football,” she had added.