Caixa Geral de Depóitos soon will have its new management team under CEO and the hope is that things will settle down at the State owned bank. A green light has been signaled by Brussels that the first phase of the major recapitalisation process can start.
The European Central Bank and the Bank of Portugal both have agreed that Caixa can now reduce its capital to cover losses, to be followed by a huge capital increase next year.
This operation even has a cute-sounding name, ‘Harmónio,’ and stage one aims to wipe out years of accumulated losses - incurred due to mismanagement and corruption as much as the 2008 financial crisis.
Sweet-smelling fresh money from the taxpayer will only be handed over in 2017 after a full disclosure of the losses from bad loans and property write downs have be accounted for in Caxia Geral’s 2016 accounts.
This first capital increase will be achieved through the transfer to Caixa of €490 million shares in Parcaixa and the conversion into capital of CoCo debt instruments owned by the taxpayer with a face value of €900 million.
The big money will flow into Caixa Geral’s coffers next year with an injection of €2.7 billion in cash and a hoped for ‘subscription by private investors’ of €500 million.
In a statement today, the bank which is still led by the discredited António Domingues, explained that these operations are part of the recapitalisation process provided for in the strategic framework approved by the State that aims to financial soundness of the bank under an agreement reached between the State and the European Commission.
In the meantime, the public waits for a full report into the last ten years of dire mismanagement at Caixa Geral, which directors were at fault, which were corrupt and how were successive government able to downplay the mess that Caixa Geral was in.
The last finance Minister, Maria Luís Albuquerque said she was ‘shocked’ at the state of the bank when this week the Court of Auditors reported a disastrous "lack of control" between 2013 and 2015 when she in charge.
Previous ministers no doubt also will express their ‘surprise’ when the facts are laid bare that this bank has been rotten to the core for a decade or more.
See also:
Court of Auditors report shows Albuquerque clouded Caixa Geral's true financial position
For a summary of Portugal's bust banking sector, read: http://algarvedailynews.com/news/9598-portugal-s-failed-banks-have-cost-the-public-14-billion-and-rising#comment-9640
