Essential Business

PSD Government lied over Novo Banco

 In Banks, News, Public Inquiries

A former secretary of State for Finances has accused the former PSD government of having lied to the Portuguese over the winding up of Banco Espírito Santo and the creation of Novo Banco which replaced it.

Addressing a public enquiry last week into mismanagement at Novo Banco and BES, Ricardo Mourinho Félix said that the winding up of BES in 2014 had been a “swindle” and accused the centre-right PSD party government of Pedro Passos Coelho of having “lied and pulled the wool over the eyes of the Portuguese”.
He attacked the government for having told the Portuguese that there would be no costs for the tax payer and that Novo Banco which was set up as a “good bank” to contain BES account holders and non-toxic assets, was “good” and “healthy” and that its sale would permit the €4.9Bn that had been injected into the bank to be recovered with some profits to boot. That, however, proved not to be the case.
“Novo Banco was new but it was not good and its assets were overvalued” so that in 2015 it already required around €4.5Bn of capital and “in practice was insolvent” said Mourinho Félix which meant that it came as “no surprise” that not a single investor wanted to buy it for €4.9Bn.
“A 2015 sale would have revealed the 2014 winding up of BES to be the scam that it was. It would have made it clear that the sale of the bank was being sold with the entire payment of the loans from the Resolution Fund and a potential profit that never existed. The government at the time had lied. It cheated the Portuguese,” said the ex-minister.
Mourinho Félix said there had neither been a lapse or error when it had been decided to initially capitalise Novo Banco with €4.9Bn, when in fact the bank actually needed nearer €10Bn.
“It was a policy to delay the resolution of a problem. To create the impression of a clean exit that left behind a weak financial system,” he told MPs at the hearing.
He also criticised the Bank of Portugal that had followed the then government’s policy to capitalise Novo Banco for the bare minimum amount instead of acting independently.
“The Bank of Portugal did not act in an independent way. It did what the then minister of Finances ordered it to do, it was a rubber stamp and that was a serious failure,” said Mourinho Felix.
The former secretary of State for Finances said that the bank’s capitalisation at the inadequate amount of €4.5Bn helped to explain why attempts to sell the bank in 2015 had failed.


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