Those charged with coming up with a solution for those BES customers who were tricked out of their savings in the ‘commercial paper’ rip-off, want to reach a final agreement by April.
Banco Espírito Santo may be asked to chip in with compensation for their customers, even though the 'bad bank' is in administration, having gone bust in August 2014.
A representative from BES, which kept all the non-performing loans and toxic assets after it went under, was at the meeting this week when lawyers representing the customers sat around the table with representatives from the Treasury, the Bank of Portugal and the Stock Market and Securities Commission (CMVM).
The BES representative will be at the next meeting too, as BES was the cause of the problem and should be part of the compensation agreement.
This ‘commercial paper’ was sold through branches of BES to its customers who found that when Grupo Espírito Santo folded, their money had all but evaporated, €432 million of it.
Those at the meeting agreed to try and hurry things along a little because the government wants an agreement confirmed as soon as possible with ‘before April’ now the goal.
The compensation package may have to come from various sources, the government does not much care as long as the 2,084 affected BES customers get paid and the issue, another one inherited from the Passsos Coelho government, can be put to bed.
On the table is the possibility of payments from the Banking Resolution Fund via the Bank of Portugal using money from Portugal’s high street banks, the Investors Compensation Scheme administered by CMVM and even from 'bank bad 'BES if it’s administrator has any cash.
The body left out of this equation is 'the State' as Prime Minister António Costa is keen that taxpayers do not have to dig into their pockets yet again to resolve a banking problem not of their own making
There is no compensation noted in the 2016 State Budget as Costa wants the financial sector to sort out its own mess, quietly blaming the Bank of Portugal for the BES collapse due to a complete lack of regulatory oversight.
Cozy meals with Ricardo Salgado and assurances that 'everything is just fine' was a novel take by governor Carlos Costa on the role of banking regulator but one that ultimately failed to work.
The next BES compensation meeting will hear discussions on how much each customer will receive based on how much was deposited and, bizarrely, what the age of the customer is and how much other money he or she has.
The lawyers representing the BES customers are going for a return of 100% of the lost money but the assembled team seems to be looking at paying a proportion of losses.
The breakthrough was due to the prime minister's widely reported comments that the Bank of Portugal had been dragging its feet over compensating these customers and that somebody must have been in charge.
Hopefully, when an agreement is reached, the Bank of Portugal’s governor Carlos Costa will see it as an ideal time to resign, a move that will be welcomed by almost everyone in the financial sector and now, much of the government.
Comments
There are two takes on this - equally valid. Elderly Portuguese, in this backward society, have - in theory - a higher status than the yoof. Although, in reality, none at risk of BES losses have higher status than a newt as the important ones were lifted out long ago.
So if staggered payments by the Portuguese State (the deepest pockets) are somehow the way forward without Brussels getting agitated then oldies will get paid before the young ones? Or more likely though the opposite - wait for the oldies to die out first. Then endlessly fudge the remainder.