Legislation to reimburse BES customers who were ripped off in the ‘commercial paper’ scandal, initiated by banking boss Ricardo Salgado, was passed by a parliamentary committee on Friday, July 14th, and next week goes to parliament for a full vote.
The proposal is to create a credit recovery fund to compensate the 2,000 customers who lost €400 million between them when they were duped into switching their safe deposit accounts into risky investments in Grupo Espírito Santo companies such as Espírito Santo Financial and Rioforte.
When BES went bust in August 2014, the depositors found that their money was no longer guaranteed by the Bank of Portugal up to €100,000 and that they had been tricked out of the lot.
The proposed recovery legislation covers only domestic former-BES clients and specifically excluded overseas investors with accounts in BES offices around the world.
The legislation is intended to partially compensate the 2,000 clients, depending on how much they initially had invested.
The deal has been put together by the depositors action group’s lawyer Diogo Lacerda Machado and was agreed in principle a year ago with the Securities Market Commission, the Bank of Portugal, the BES ‘bad bank’ and the Government.
The solution proposes that those who were duped should receive varying amounts, with those who lost between €250,000 and €500,000 to receive 75% back, and those who lost more than €500,00, getting half of it back.
The payments will be from a special credit recovery fund, which must pay 30% of the compensation right after signing the agreement. The remaining amounts will be paid in further tranches in 2018 and 2019.
The special fund has no money of its own, this will have to come from the bank and will have to be underwritten by the public with the State guaranteeing the second and third payments, a situation that will annoy many MPs when it comes to the debate.
As for the overseas investors, mostly Portuguese nationals working and saving in other countries, there is no equivalent compensation plan despite their plight being equal to those account holders base in Portugal. Their inclusion in the reimbursement plan was blocked by the Socialist Party.
