The faults highlighted in the Bank of Portugal’s scathing report on management practices at Montepio bank, leading to a ‘high risk profile,’ have been addresses according to the regulator and Montepio, run by José Félix Morgado.
Montepio absolutely guarantees that all the failures identified by the Bank of Portugal that were not been challenged, have been corrected. In a clarification sent to the newsrooms, Montepio said that the Bank of Portugal’s report does not reflect the current situation at Montepio.
The regulator’s report gives serious warnings about Montepio: the bank has "a high level risk profile" and its strategic exposures "does not guarantee sound management," and that there is a "consistent deterioration of the quality of the clients' portfolios."
The central bank's conclusions were overwhelmingly negative but Montepio explains that in view of the recommendations from the regulator, Montepio has two options: to dispute the findings or to accept and correct them.
Montepio notes that in 2015, it "reviewed the procedures and areas for improvement in internal governance and implemented a set of actions that strengthened the internal control system by the end of the year."
This situation, says Montepio, has been "recognised by the regulator," and that adapting to best practices is "an ongoing process" and affirms readiness to continue collaborating with the authorities.
The Bank of Portugal’s report stated that since July 2015, it had not received any risk monitoring reports on the bank's assets and operations and that it had not had timely access to minutes of main board or management council meetings. The regulator pointed out the "fragility of internal procedures and the quality control of the data across the diverse systems of the institution."
More worrying was the reckless granting of credit, with the Bank of Portugal stating that loans are granted without the rules of Montepio's internal regulations being complied with, which do not accord with the opinion of the bank's own credit risk analysis and without loan decisions being justified in a robust manner.
The regulator gave Montepio thirty days to present a plan to correct the failures that had been identified and to respond to the various issues raised in the report.
Montepio says it already has guaranteed that it "always adopts best practices and recommendations" adding that it is "finalising the application process for the most advanced models of risk assessment.”
Hopefully, the Bank of Portugal, not noted for swift action in any of its various regulatory roles, has caught Montepio (credit rating B+/B1/-) in time to save the bank running down the same destructive path as BES and Banif.
If this all seems horribly familiar, it is as in April 2015, the Bank of Portugal wanted Montepio's then-boss, Tomás Correia, to quit as it feared Montepio would collapse. Correia was fired and court cases are pending. Incredibly, Correia remained on the parent company's board.
Correia guaranteed that 90% of the detailed criticisms in the banking supervisor's report had been corrected, and 10% partially dealt with. Clearly his undertaking had not been carried out, or, Montepio came up with a host of additional contraventions and risky practices with which to startle the Bank of Portugal.
