The governor of the Bank of Portugal has warned Portuguese-speaking central banks to monitor the parent companies of banks operating in their countries, because a problem in Europe could bankrupt those subsidiaries, even those with healthy finances.
Carlos Costa was speaking at the 27th meeting between central banks from Lusophone countries and covered the EU rules for banks in trouble that could easily affect their overseas operations.
The liquidation of a domestic Portuguese bank with subsidiaries in Angola, for example, could lead to the bankruptcy of that subsidiary even if solvency and liquidity levels are good. Hence, a bankruptcy in Portugal could affect customers and taxpayers in overseas markets.
“Financial institution oversight needs to be bifocal. We need to know what is going on with subsidiaries, and regulators need to keep up with what happens to the parent companies of subsidiaries in those countries,” Costa warned, unaware of the irony of his speech in the light of his lack of monitoring of BES in Portugal nor its deeply indebted subsidiary in Angola which was over €3 billion in debt while reporting all was well.
Costa also pleaded for more “cooperation among the resolution authorities” of the various countries, “at the risk of one day waking up with a decision which impacts the deposit guarantee fund, public accounts, confidence in the system and the credibility of the supervisor.”
Nothing Costa has ever done has been his fault, according to Costa, despite a disastrous two-term reign as the governor of the Bank of Portugal and as the country’s banking regulator.
Regarding the supervisor’s responsibility in these matters, Costa said that the supervisor “is always the one who appears at the end as being responsible for everything, even though he is not the source of the problem.”
On this last point, many would disagree as Costa’s lack of supervision at BES and Banif are but two examples of avoidable crashes, had he not been asleep at the wheel.
Costa’s lecturing of overseas bankers, presumably they are well aware of his track record, shows him not to have learned from his mistakes not having gained any insight into his own failings. The nickname 'Mr Magoo' is well deserved.
