The Bank of Portugal has rejected a carefully thought out offer from Portugal’s stock market regulator to solve the €500 million problem held by over 2,000 ripped-off BES depositors
Carlos Costa, the governor of the Bank of Portugal seems happy to continue to reject any offers designed to resolve the depositors' issue until Novo Banco is sold off at which point he can retreat into the obscurity from which he emerged.
The proposal made by Carlos Tavares, the chairman of the Securities and Exchange Commission, was genuinely designed as a solution for those BES customers sold a range of dodgy commercial paper in a collapsing Grupo Espírito Santo empire in the guise of safe-as-houses bank deposits.
However the Bank of Portugal says the CMVM proposal is ‘not feasible.’
The plan suggested by tavares involves exchanging the debt held in Grupo Espírito Santo companies for paper held in Novo Banco where at least there is some value underwriting the ‘investment.’
The Bank of Portugal is concerned that the solution presented yesterday in Parliament by Carlos Tavares, chairman of CMVM, to swap commercial paper in Rioforte and Espirito Santo International for subordinated debt in Novo Banco is not feasible
This is primarily because the Bank of Portugal wants to sell Novo Banco to the highest bidder with as few complications as possible.
According to the Bank of Portugal, the exchange of paper suggested by Carlos Tavares "would only be feasible if it were performed in such a way that it did not result in damage to Novo Banco.”
The detail of the proposal presented by Tavares to the depositors includes some immediate liquidity through partial repayment of the dodgy commercial paper, the opening of an interest-free credit line and a pledge of issuing matching Novo Banco paper to €100,000 per depositor - all sensible stuff designed to help start to repair the financial damage done to those duped by Ricardo Salgado and hung out to dry by the Treasury's Maria Luis de Albuquerque, Novo Banco's Stock da Cunha and the Bank of Portugal's Carlos Costa in his role as financial regulator.
"We are willing to work with the Novo Banco Bank and the Bank of Portugal to find a balanced solution which must take into account that there are people who need money to survive," said Carlos Tavares, adding that he already has met one of the potential buyers of Novo Banco who is keen to sort out the mess as it is affecting the reputation of Novo Banco by association.
Representatives of the holders of worthless Grupo Espírito Santo company paper said that the proposal is "exceptional and meets our expectations. It is integrated, phased and will not harm the ratios and solvency of the bank."
It was still rejected by Carlos Costa despite those affected thinking the idea was rather thoughtful and inventive.
