Banco Espírito Santo secretly funded Espírito Santo International through Panama for two years, according to the Financial Times.
The FT has seen documents that reveal that the Banco Espírito Santo accounts did not show these secret loans made to Espírito Santo International, which indirectly owned 25% of Banco Espírito Santo.
These documents "raise new questions about the supervision by the Bank of Portugal of a bank that experienced one of the biggest financial collapses in Europe."
The documents show that between 2012 and 2014, BES extended lines of credit to a small bank in Panama owned by the Espírito Santo Group, which then used those funds to buy debt issued by Espírito Santo International.
The bank, located in Panama, had little other purpose in life other than to buy debt issued by Espírito Santo International and its subsidiaries Rioforte and Espírito Santo Irmãos.
Banco Santo International reported in its annual reports and accounts that it had some exposure to the bank in Panama, but never explained that ‘some exposure’ was in the form of loans being used to finance Espírito Santo International.
The increasing exposure to bad debt was the start point of the collapse of BES with losses of around €3.6 billion which led to intervention through the Resolution Fund.
The increasing exposure of BES to bad debt was cunningly hidden using intricate financial schemes and actions that made full use of companies based in tax havens such as Panama.
It may not have been illegal to use offshore companies, but to use them for share support operations thus duping shareholders and showing value when all that exists was exposure is illegal and duplicitous.
This is not smart, prudent capitalism on behalf of shareholders, it is corporate greed and the desperation of the one person who pulled all the strings, Ricardo Salgado.
