Luxembourg said on Tuesday it would put two key shareholders of struggling Portuguese lender Banco Espirito Santo (BES) in administration after they demanded protection from creditors.
A court said it had accepted the request by Rioforte Investments and Espirito Santo Financial Group (ESFG) and appointed an official to oversee their affairs.
EFSG is the single biggest shareholder in BES with a more than 20 percent stake.
A third BES holding company, Espirito Santo International (ESI), was put under adminstration in Luxembourg last week.
Earlier in Lisbon, shares in the subsidiary of the holding companies, Banco Espirito Santo (BES) were showing a fall of 6.22 percent to 0.41 euros.
BES is the biggest private bank in Portugal where it operates in many sectors of the economy, stoking concern its problems could have a wider knock-on effect.
Late on Monday, the Portuguese central bank said that BES could withstand a blow to its accounts, even if half-year results to be published on Wednesday exceed its financial reserves estimated to be 2.1 billion euros ($2.8 billion).
The central bank said that if necessary it could intervene and had up to 6.4 billion euros out of 12.0 billion euros provided by the European Union and International Monetary Fund under a bailout from which the country has now emerged.
The newspaper Expresso reported that the bank could report a loss of 3.0 billion euros because it had a bigger-than-expected exposure to the Espirito Santo group of companies.
Administration allows a company to put its affairs in order while protected from creditor claims.
An administered company may eventually be closed down, restructured as a completely new entity or be broken up and sold off.
The difficulties in the Espirito Santo group of companies surfaced earlier this year, denting confidence in Portugal’s future just as the country completed the tough 75 billion euros EU-IMF debt rescue programme.
Last week, former BES head Ricardo Salgado was was arrested in connection with money laundering following a massive probe by the authorities which dates back to 2011.
The investigation targets tax evasion and money laundering relating to private wealth managers in Switzerland and clients in Portugal.
Salgado gave evidence voluntarily in December 2012 to investigators, who said at the time that he was not a suspect.
He was forced out as head of BES after 23 years on June 20 amid allegations of accounting irregularities at one of the bank’s Luxembourg-based holding companies.