The Bank of Portugal spent €2 million in legal advice on the restructuring of BES last year as it was ‘forced to make an unprecedented effort to safeguard financial stability,’ according to Carlos Costa (pictured), the bank’s governor.
The controversial resolution measures applied to BES last August, dividing the bank into 'good bank, bad bank' left thousands of individual investors, and many big name financial organisations nursing massive losses as the bad bank was used as a depository for all the toxic assets of Ricardo salgado's failed BES.
In the Bank of Portugal’s activity report published today, the regulator revealed that its Supplies and Services expenditure went up 12% to €42 million in 2014, compared to the previous year, due to extraordinary factors "including spending on consulting to support the implementation of the Single Supervisory Mechanism (+€4 million) and the cost of legal advice relating to Resolution measures for Banco Espírito Santo, (+€2 million.)”
The bank’s report points out that these increases were "partially offset by reduced spending under the Economic and Financial Assistance Programme, down €1 million.”
The bank is to send the Treasury a dividend cheque of €243 million representing 80% of its profit in 2014 which was €51 million higher in 2014 at €304 million. On taxes, the Bank of Portugal paid more than €129 million to the Treasury in 2014.
The profit is net of a €245 provision for general risks (€130 million in 2013).
This rise in the bank’s provision reflects in part the possibility that it will be held legally responsible for the impact that its restructuring of BES has had on 2,500 individual investors and on several large corporate investors such as Goldman Sachs which is going to court in London to reclaim the €770 million lost to its Oak Finance vehicle when BES was divided by Costa and his team.
The Bank of Portugal increased its staff level by 2.5% to 1,776 employees as a result of new "regulatory and supervisory duties.” Nevertheless, total personnel expenses fell 2.2%.
The country’s gold reserves held by the Bank of Portugal appreciated €1,433 million last year, to €12,147 million, a rise caused by the rise of the dollar against the euro in the latter half of 2014 despite the value of gold falling by 1.7% in the year.
Portugal has one of the largest gold reserves in the euro zone and the second largest gold reserves in the world as a percentage of GDP, yet has agreed not to sell any.
Portugal is a signatory to the Central Bank Gold Agreement which re-applied as of 27 September 2014, and lasts for a further five years.
The signatories have stated that they currently do not have any plans to sell significant amounts of gold. The major European central banks first signed this agreement in 1999, limiting the amount of gold that signatories can collectively sell in any one year.
Comments
Yet how is it that all the Portuguese banks either failed at the start of the crisis due to fraud and / or mismanagement; needed hand outs to stay afloat or like BES crashed spectacularly a few years later.
As investments all Portuguese banks have long been seen - like the county itself - as risky or worse.
But then why should anyone be surprised? Portugal has always had regulators because Brussels wanted to know it had them. But it quite obviously has never had regulation by them !
So why should Portugal's banks be any different?