LISBON, July 28 Portugal's central bank said
late on Monday that if Banco Espirito Santo posts a
loss larger than its existing capital cushion of 2.1 billion
euros ($2.8 billion), a capital increase will be used to
guarantee adequate solvency levels.
Earlier, Expresso newspaper's online edition said BES was
likely to report a loss of around 3 billion euros on Wednesday
after having to assume additional debt liabilities linked to the
troubled Espirito Santo group of its founding family. BES
officials were not immediately available to comment.
Three of the Espirito Santo family holding companies,
including ESFG, which holds a 20 percent stake in BES, have
requested creditor protection this month.
"Regarding media reports on a possible negative result at
BES... the Bank of Portugal reiterates that if any insufficiency
of the current capital cushion is verified, the interest shown
by various entities in taking a large position in BES indicates
that a private solution for a capital increase is doable," the
central bank said in an emailed clarification.
"As the last resort, if needed, the public recapitalisation
line is available ... in any case, the solvency of BES and
safety of funds entrusted to the bank are guaranteed."
Bank of Portugal chief Carlos Costa has already said he
expects international investors to step in if BES, Portugal's
largest bank by assets, were to need additional capital. BES
already raised 1 billion euros in a capital increase completed
on June 11.
Problems have been escalating for the family that founded
the bank more than a century ago. Earlier this year, accounting
irregularities were identified in one of its holdings.
The potential losses at BES, which put its direct exposure
to family holdings at 1.15 billion euros, prompted a brief
sell-off in international equity markets earlier this month.
The bank has said it has 2.1 billion euros in capital above
minimum regulatory requirements to deal with any losses. But it
has not been able to quantify the potential losses, because it
is awaiting a restructuring of the Espirito Santo holding
companies to do so.
There are also concerns about BES' Angolan business BESA
which has a loan-book covered by an Angolan state guarantee
($1 = 0.7442 Euros)
(Reporting By Andrei Khalip; Editing by David Gregorio)