By: CHRIS GRAEME
PORTUGAL’S STOCK market plummeted by 10 per cent on Monday wiping more than 12 million euros of the value of shares in one day.
It brings accumulated losses in the recent weeks of market turbulence for Portuguese companies to a massive 6.2 billion euros with at least half a dozen key companies losing half their value.
The panic in the financial sector in both Lisbon and Porto led to the unprecedented step of the Prime Minister, José Sócrates, to call for calm among the general population worried about their jobs, savings, pensions and deposits.
At least two major Portuguese banks, Millennium bcp and BPI, are facing serious liquidity problems as banks either refuse to lend money to each other or do so by levying ridiculously high interest rates running at up to eight per cent.
Mass panic
Shares in Portugal’s monopoly electricity company EDP (Energias de Portugal) crashed by 16.44 per cent, while Galp, already accused of deliberately exploiting market speculation, saw its shares fall by a historic 13 per cent.
Brisa shares sunk by 12 per cent, with accumulated losses of 42 per cent this year, while Portugal Telecom saw 431 million euros wiped off the value of its assets and receipts.
Even the supermarket giant Jerónimo Martins didn’t escape the onslaught with its share value losing 429 million euros, falling 13 per cent.
In face of mass panic, the Portuguese government announced on Wednesday that it would cover all Portuguese bank deposits in case any banking institution collapsed.
However, for the time being, it has decided not to interfere with the amount of funds it currently guarantees which is set at 50,000 euros for each depositor.
“Whatever happens I want to promise the Portuguese that their deposited savings in the nation’s banks and banks operating in Portugal are guaranteed,” said the Minister of Finances, Fernando Teixeira dos Santos, on going into an emergency meeting of Eurogrupo in Luxemburg on Monday.
For this total guarantee assurance, it is vitally important for Teixeira dos Santos that all the solvency indicators and ratios within the national banking system are secure, which the Governor of the Bank of Portugal, Vítor Constâncio, said they were last week, after having held a closed round-table meeting with the nation’s key bankers.
However, the collapse of the Lisbon Stock Market, which fell by 9.8 per cent on Monday, is affecting Portuguese national bank liquidity.
This is because of the so-called ‘Mark-to-Market Rule’, which expects banks to make adjustments on their accounts to reflect gains and losses at the end of a trading period.
This has seen millions wiped of bank balances as shares and therefore company values tumble, reducing bank cash-flows and the banks ability to lend, borrow and trade.
Caixa Geral de Depósitos has been most affected from among all the four main national banks, losing almost 800 million euros because of its participations with EDP (5.1 per cent) and BCP (3.3 per cent), Zon Multimedia (13.2 per cent), PT (5.8 per cent) and Galp (1.2 per cent).
Scandals
BCP too, which has a 10 per cent stake in BPI and had already been weakened by a series of crisis-in-confidence and management scandals over the past year, has also admitted losses of 10 million euros since September 30, but in fact that figure could be nearer 60 million euros according to analysts.
Although BCP might seem less affected than say, CGD, it did invest almost all of its financial participations to the Pensions Fund (Fundo de Pensões), which, in turn, has a 10 per cent stake in ailing construction giant Teixeira Duarte, 10 per cent in Cimpor, and an undisclosed value in Sabadell, all of which have been hit hard by the crisis.
BES has already seen its assets downgraded to 160 million euros from 246.4 million euros while BPI has seen values in assets fall from 91.8 million euros to 60 million euros as a result of the losses from being saddled with, selling or exchanging assets and shares that are now lower than their original purchase price.
The Bank of Portugal has already said that it is prepared to step in and partially nationalise any Portuguese banks affected by the crisis through a chronic lack of liquidity.
The BdP is currently studying three practical measures to adopt for commercial Portuguese banks having difficulties in presenting assets to guarantee the payment of debts and loans, along lines similar to the French, Belgium and Luxemburg government bail-out of Fortis.
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