Caixa Geral directors received huge bonuses despite causing massive losses

caixageral2 An EY report covering the most profligate years at Caixa Geral de Depósitos, between 2000 and 2015, outlined the Director’s enviable pay awards despite the State owned bank making heavy losses.

The document is highly critical, especially about the 2000-2008 period, during which, “there was no evidence of the guiding principles of variable remuneration being applied.”

Even in the face of crippling losses, the Directors paid themselves as if all was going swimmingly, even giving themselves a vote of confidence.

The EY audit emphasises that there was no relationship between pay and performance which would have encouraged a balance between capital and risk, nor were any claw-back clauses to ensure CGD Directors were responsible for past decisions.

EY believes that such measures could have contributed to a, “more risk-sensitive credit decision process, with reference to the operations analysed in this audit.”

The consultants’ report revealed that, “the volume of CGD’s impairments increased from 46.9% in 2013 to 58.1% in 2015,” in the construction and real estate sector.

Meanwhile, all of the nation’s other high street banks worked hard to reduce impairments in this segment.

EY looked at several CGD loans and found that many of them were granted without any in-depth risk analysis, including the approval of loans that carried an ‘unfavorable’ or ‘conditional’ risk opinion by the bank’s own risk management division.

One of these transactions is related to the acquisition of shares of Cimpor by Investifino, which gave BCP and Cimpor shares as a guarantee to CGD.

When these shares tanked, “the deal was not good for the state bank,” according to EY, and there was a need to, “restructure the debt.”

Caixa Geral lost almost €1.2 billion in 46 loans granted between 2000 and 2015, in which credit standards were not met.

Faria de Oliveira, one of Caixa Geral’s presidents in the darkest period, between 2007 and 2010, and today the president of the Portuguese Banking Association, continues to insist that secrecy is the best way to guarantee confidence in banking.

The EY audit now is in the hands of prosecutors.