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Finance Minister hits out at Bank of Portugal’s mishandling of BES resolution

MinisterCentenoFinanceThe star of Portugal’s improving finances, Finance Minister Mário Centeno, said on Wednesday that the resolution for the collapsed Banco Espírito Santo, devised and agreed by Carlos Costa at the Bank of Portugal, already has cost taxpayers hundreds of millions of euros, and it’s not over yet.

Centeno said that the Banco Espírito Santo ‘resolution’ created an incalculable risk for the financial system, which only recently has been quantified with the sale of Novo Banco to Lone Star.

Centeno (pictured above) added that the 2015 U-turn by the Bank of Portugal, to transfer senior debt from Novo Banco back to BES, cost the State hundreds of millions of euros and that the sale of Novo Banco does not mean that the taxpayer is off the hook as if Novo Banco has to pay up for losses, the taxpayer will be picking up the bill.

The Finance Minister and his Assistant Secretary of State, Ricardo Mourinho Félix, were attending a Parliamentary Committee on Budget and Finance to answer questions about the sale of Novo Banco and took the opportunity of roundly criticising Carlos Costa’s management of the financial crisis, triggered by the collapse of BES.

Social Democratic Party MP, António Leitão Amaro, asked Caetano whether the State had taken on yet more responsibilities and liabilities with the sale of Novo Banco to US vulture fund, Lone Star. This sale could cost taxpayers up to €3.89 billion but there are other liabilities.

Ricardo Mourinho Félix, said that risk still exists, “Yes, there is such a possibility, it is not worth hiding it,” he said, explaining that the State had to guarantee to pay future liabilities and legal costs – “if the State had not assume these costs,” said Felix, “no one would have bought the bank.”

The Finance Minister said that the sale of Novo Banco was necessary in determining the overall risk to the financial system, adding that the taxpayer now has an annual budgeted liability of €850 million.

MP, Cecília Meireles said that the government had failed, “It failed to sell the entire bank: 75% of the bank was sold to Lone Star and the Resolution Fund kept 25% but has kept 100% of the liabilities,” adding that one of the main objectives of the sale was that there would be no taxpayer guarantee – and there is.

It is clear that the Bank of Portugal’s handling of the BES colllapse and the subsequent treatment of senior bond holders, made things worse but the governor of the institution, Carlos ‘Mr Magoo’ Costa, can not be sacked by the government and may not even care that in the wake of many of his decisions, taxpayers are left covering billions in losses.

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