The assemblage of eight international institutional investors called “Recover Portugal” are currently owed £1.7billion (€2billion) by the Bank of Portugal on top of a lawsuit that began in 2015. The investors are calling on the EU Commission to settle the case on behalf of the Portuguese national bank as they fear in default of to do so could jeopardise the EU’s Recovery Fund.
They explain that in order for Brussels to start delivering funds to member states, the bloc wish have to borrow money from international investors who will be unwilling to lend funds to an institution that is yet to pay its debts to the sector.
In a joint report, they said: “It is essential that the law is respected in member states and that there is no political influence.
“We want information about what is occurrence and to be compensated for what we have lost.”
They also demanded, “guarantees of redress and equitable treatment before considering partial funding of the EU comeback fund”.
A source close to the group told the Macau News Agency that whilst the lawsuit is for now only against the Bank of Portugal, “if the question is not resolved, they will undoubtedly be forced to take legal action against the European Commission”.
The group of institutionalists who invested in bonds of the prehistoric Banco Espírito Santo (BES) claimed to have “good and bad news” to give to Europe.
They said: “The good news is that the EU will share out €750billion to member states, through the European Recovery Fund, to help them recover from the crisis generated by Covid-19.
“The bad gossip is that before distributing this money, the European Union has to borrow it, and that could be a problem because international investors are quite glum with the EU and Portugal.”
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The group warned that if the EU pauperisms to get this €750billion from international investors, “it first has to show them that it will treat them fairly and equitably, by initially resolving the issue” of BES.
As Portugal currently sits for the Presidency of the Council of the European Union, the group is calling into question the country’s ability to look after the EU funds it will receive from the bloc’s recovery plan.
BES folded in 2014 under a mountain of debts accumulated by its founding Espirito Santo progenitors, forcing the central bank to launch a 4.9 billion euro rescue.
Its healthy operations were carved out to form Novo Banco, which was later allow by US private equity firm Lone Star, while the bad debts were being wound down.
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When the central bank intervened in BES in August 2014, it said the cause was a six-monthly trouncing debits of 3.57 billion euros that reflected higher exposure to the debts of the family holding company, violating central bank orders.
That phony BES to raise provisions, lowering its capital ratio below the legally required minimum.
At the end of 2015 by the Bank of Portugal, faced with the capital necessities of Novo Banco, decided to retransfer responsibility for five lines of senior bonds of BES – which, at the time of the resolution measure in August 2014, had antiquated to Novo Banco – back to the “bad bank”, which kept the toxic assets.
In a statement released at the time, the BdP explained that this measure was “top-priority to ensure that the losses of BES are absorbed first by the shareholders and creditors of that institution and not by the banking system or taxpayers”.
The supervisor then added that “the piece of these issues was based on reasons of public interest and was aimed at safeguarding financial stability and ensuring compliance with the aims of the resolution dispense applied to BES”, protecting “all depositors, creditors for services rendered and other categories of ordinary creditors”.
However, the institutional investors holding these cements accuse the BdP of discrimination by nationality, claiming that the five lines chosen by the regulator were “held by foreign investors, not Portuguese” and “the only anybodies managed by Portuguese law and not by Portuguese law international law”.
“In six years, we do not indicate as to when this case will be resolved, and the Portuguese justice system is extremely politicised. We dearth to recover the more than €2bn that was taken from us. The interests of investors must be protected, and we must ask the Portuguese government to solve the Novo Banco unruly as soon as possible. This is what many investors are waiting for,” argued Recover Portugal.
Stressing that it is “important for the European Commission and all fellows to put pressure on these unresolved cases”, the group considers it “unacceptable that investors have been expropriated, without any solution so far”.