Portugal seeks to ease fears over crisis-hit bank BES

Portuguese authorities on Friday sought to allay market fears over the financial health of the country’s biggest bank Banco Espirito Santo, which has seen its shares plummet over its parent company’s debt woes.

“There is no reason to doubt the security of the funds entrusted to the BES, and its savers have no need to be worried,” Portugal’s central bank said in a statement.

Prime Minister Pedro Passos Coelho added that “there is no reason for the state to intervene in a bank which has solid capital and which has a comfortable margin to deal with any eventuality, even the most adverse”.

Lisbon stock market regulators suspended trading in BES shares on Thursday after they plummeted over 17 percent to 0.50 euros.

Concerns that the bank’s troubles could have a wider impact on Portugal — which only two months ago exited a three-year, 77 billion euro ($106 billion) international bailout — sent shockwaves through global markets as questions resurfaced over eurozone debt.

The Portuguese bank has been hit by suspicion that its holding company, Espirito Santo International (ESI), covered up a 1.3 billion euro hole in the accounts.

BES said Friday that its exposure to debt in the Espirito Santo group reached 1.18 billion euros at the end of June.

However it did not have an estimate for potential losses related to the exposure, pending the publication of a restructuring plan from the group.

European stock markets were trading higher on Friday after a sell-off the day before. Bond yields on peripheral eurozone states, which had jumped on Thursday, also eased.

“The Bank of Portugal… has reassured the market and calmed the situation,” said Nordine Naam, a strategist at financial group Natixis.