THE GOVERNOR of the Bank of Portugal (BdP), Vítor Constâncio, has announced that the first phase of investigations into malpractices at Portuguese bank BPC should be completed by the end of July.
The BdP has also admitted the possibility that some directors could be banned from holding positions of high management within the Portuguese financial world but has not specified if these are former or current BCP directors.
Vítor Constâncio said that he had no doubts that the Banco Comercial Português (BCP) committed “serious irregularities” between 2000 and 2007, “involving 17 illegal offshore companies” which were being used to hide “dubious transactions” without the knowledge of the BdP.
Following various BCP inspections, 22 illegal offshores, covered by credits granted by the bank linked to shareholders and clients, were discovered for 2002 alone.
“We should have concluded the investigation process by the end of the month,” said Vítor Constâncio on July 10. “From this we expect some fines and probably cases whereby the right to exercise positions within the sector will be prohibited.”
The first phase of the BdP investigation covers the misuse of offshores to buy BCP shares, which were illegally financed by the bank itself under conditions which could be constituted as criminal.
The entities and management involved in the investigation now have 15 days to contest the accusations made and present witnesses.
Unsecured credits
Meanwhile, troubled bank BPN, which is facing credit insolvency and is under investigation from both the Bank of Portugal (BdP) and financial regulation authority watchdog CMVM, is to announce a major restructuring plan by August 1.
The beleaguered Banco Português de Negócios (BPN) is said to have a 300 million euro black hole which it hid by illegally transferring unsecured credits to offshore companies without informing the BdP.
The new Board of Directors, led by former Finance Minister Miguel Cadilhe, says that it is confident that its ‘Operation Cabaz’ aimed at restoring stock market and investor confidence in the bank will be successful.
The bank has plans to try and raise its social capital to the tune of 300 million euros by selling and issuing shares from its holding company SLN (Sociedade Lusa de Negócios) in line with demands from the Governor of the BdP, Vítor Constâncio.
In a statement to the Portuguese business daily Diário Económico, Renato Homem, a BPN board director, said that the bank’s administration was pulling out all the stops and working with extreme intensity with consultants to remedy the bank’s financial woes.
The first measure in the Board of Director’s restructuring plan was made public on Tuesday last week by the intended sale of SLN shares to raise capital which had been approved by the Board on July 4.
The former finance minister has already sent a letter to key shareholders explaining in detail how the operation would work and their respective participations and assured the market that the “feedback has been positive”.
Apart from raising the bank’s capital share, the bank is also aiming to restructure its credibility by injecting 235 million euros liquid capital into the system.
The bank also intends to carry out an independent external in-depth “extraordinary” audit.
Operation Cabaz will be reserved exclusively for shareholders and will take place between July 18 and August 1 by selling actual SLN SGPS shares for around 2.75 euros per share, resulting in a capital gain for the bank of 1.16 euros on each share sold.
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