The Bank of Portugal wants to ‘change the relationship’ between banks and their customers.
Carlos Costa has decided that bank customers have to realise that there are risky financial products and safe financial products and said there was a need for a change in the relationship between customers and their banks.
With the BES fiasco clearly in mind, Costa said today that different financial products have different risk levels that he did not want to give the impression to investors in products recommended by banks that they would be covered whatever the outcome.
Carlos Costa was speaking at a conference in Lisbon on ‘Regulation and the Consumer" although why he had been chosen to address this topic remains a mystery.
The governor said there should be changes regarding reporting requirements and that each customer should receive written confirmation as to what they are buying so that there can be no come back on the bank when it all goes awry, as in the case of BES customers who were urged to buy shares in branch.
Instead of buying safe investments, the BES customers were sold €550 million of shares in the collapsing Espírito Santo empire with the full knowledge of the bank. This money has yet to be returned as it ended up staying at BES 'bad bank' when Carlos Costa divided the failed BES business into two parts.
Carlos Costa also stressed that even where there is ‘quality supervision,’ lacking in Portugal under his tenure at the Bank of Portugal, the supervisor cannot be held responsible if the information received has been ‘doctored’ in some way.
The governor said that the role of supervisor was essential for a stable financial system as there is a risk of contagion if one bank goes under.
In terms of financial stability, the resolution of the collapse BES was "successful," he said, specifying that his measure meant the deposit guarantee scheme did not have to step in.
Successful for some, but not for the BES investors who have been left out in the cold, ignored by Costa, the Stock Market Regulator, Novo Banco and the Ministry of Finance.
Thus Costa’s attempts to rewrite history have begun, blaming the customer for all ills and defending his role as regulator which, he claims, can only be as good as the information fed to him by those he is regulating.
