Portugal acts to ease fears over bank
Print Edition
PORTUGUESE authorities yesterday sought to allay market fears over the health of the country’s biggest bank Banco Espirito Santo, which has seen its shares plummet over its parent company’s debt woes.
“There is no reason to doubt the security of the funds entrusted to the BES, and its savers have no need to be worried,” Portugal’s central bank said in a statement.
Prime Minister Pedro Passos Coelho said: “There is no reason for the state to intervene in a bank which has solid capital and which has a comfortable margin to deal with any eventuality, even the most adverse.”
Lisbon stock market regulators suspended trading in BES shares on Thursday after they plunged by over 17 percent. When the ban was lifted around midday yesterday, the shares gained 2.36 percent to 0.50 euros (68 US cents).
The overall Portuguese market was 0.92 percent higher meanwhile, after losing four percent on Thursday.
Concerns that the bank’s troubles could have a wider impact on Portugal, which only two months ago exited a three-year, 77 billion-euro international bailout, sent shockwaves through global markets as questions resurfaced over eurozone debt.
The bank has been hit by suspicion that its holding company, the family-run Espirito Santo International, covered up a 1.3 billion-euro hole in its accounts.
BES said yesterday its exposure to debt in the Espirito Santo group reached 1.18 billion euros at the end of June.
Coelho said it was important that the problems “afflicting the Espirito Santo family” not affect the bank.
But it didn’t have an estimate for potential losses related to the exposure, pending the publication of a restructuring plan from the group.
European stocks also traded higher yesterday after a sell-off the day before. Bond yields on peripheral eurozone states, which had risen on Thursday, eased yesterday.
“The Bank of Portugal... has reassured the market and calmed the situation,” said Nordine Naam, a strategist at financial group Natixis.
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