Regulators to reject new board at Portugal's BES-sources

LISBON, July 3 Thu Jul 3, 2014 12:24pm EDT

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LISBON, July 3 (Reuters) - Portuguese regulators plan to reject the new executive board for Banco Espirito Santo (BES) , in a further setback for the founding family of Portugal's largest listed bank by assets, sources with knowledge of the situation said on Thursday.

The Espirito Santo family has come under scrutiny since it acknowledged in May there were "material irregularities" at Espirito Santo International, a Luxembourg-registered holding company through which it has held part of its stake in the bank.

Ricardo Espirito Santo Salgado, the family's patriarch, resigned as chief executive of BES on June 20. Other family members, including Salgado's cousin Jose Maria Espirito Santo Silva Ricciardi, have also submitted their resignation from the bank's executive committee.

The family has proposed Amilcar Morais Pires, the bank's current chief financial officer, as new chief executive.

However, the sources said he was viewed as close to the Espirito Santo family, and that the Bank of Portugal wanted the new board to be clearly independent.

As supervisor of the country's financial sector, the central bank can veto any proposed board changes at a bank.

Officials at BES, the Bank of Portugal and the CMVM market regulator were not immediately available to comment.

Changes to the executive board of BES are set to be decided at a shareholder meeting on July 31 but the list of names can be changed up to that point.

Authorities in Luxembourg said last week they had launched investigations into Espirito Santo family holding companies over alleged breaches of company law.

One of the sources said regulators in Portugal were cooperating closely with those in Luxembourg.

Sources have told Reuters that the Bank of Portugal pushed for Salgado's resignation following the discovery of irregularities at the family holding company. Salgado has said he and the bank knew nothing about the irregularities.

State television station RTP reported this week that the current chief executive of Energias de Portugal (EDP), Antonio Mexia, was a possible candidate to take over at BES.

"EDP denies that Anonio Mexia is leaving for BES," said an EDP spokesman.

The Espirito Santo family's grip on the bank began to wane after its holding was diluted in a 1.045 billion euro ($1.43 billion) rights issue last month. Still, the family remains BES' single largest shareholder with a 25 percent stake.

It has controlled BES together with French bank Credit Agricole, which also saw its stake slip in the rights issue.

($1 = 0.7331 Euros) (Reporting by Axel Bugge; Editing by Alessandra Galloni and Mark Potter)

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