(Recasts with BES clarification on management)
LISBON, July 29 Banco Espirito Santo on Tuesday cancelled a shareholder meeting scheduled for July 31 after its largest shareholder Espirito Santo Financial Group was granted protection from creditors.
The meeting would have confirmed the bank's new management team in their jobs, but these appointments will not be affected by the meeting not taking place.
"The cancellation of the meeting has no impact on the current management. The recent appointments remain in force," a BES spokesman said.
BES said in a statement that the creditor protection process rendered all proposals presented earlier by ESFG ahead of the meeting null and void.
ESFG, an Espirito Santo family company, is the largest shareholder in Portugal's biggest listed bank, with a 20 percent holding. But problems have been escalating for the Espirito Santo family that founded BES over a century ago since accounting irregularities were identified at one of its holdings earlier this year.
Uncertainty over BES's exposure to potential losses has wiped out more than 50 percent of the bank's value since mid-June. Its shares fell as much as 11 percent on Tuesday after cancellation of the shareholder meeting.
BES is due to report results on Wednesday and Portugal's central bank has said if BES had a loss larger than its existing capital cushion of 2.1 billion euros, a capital increase would be used to guarantee adequate solvency levels.
A report in Portugal's Expresso newspaper said BES was likely to report around a 3 billion euro loss that could wipe out its capital reserves and force a new capital increase.
BES officials declined to comment on the report.
The shareholder meeting was due to confirm a new executive board headed by Vitor Bento that started work on July 14. The new management was brought in on orders from the Bank of Portugal to replace members of the Espirito Santo family.
ESFG had sought protection from creditors last week, putting an immediate stay on more than 1.5 billion euros in claims.
A Luxembourg court on Tuesday accepted the creditor protection requests from EFSG and Rio Forte Investments, another Espirito Santo family holding.
These two companies join the family's top-level holding, Espirito Santo International, which received creditor protection a week ago to shield itself from creditor claims.
ESFG said the court appointed a judge to deal with the process and the judge was expected to make her report on ESFG's case on Oct. 6.
Rio Forte holds a 49 percent stake in ESFG, which in its turn has a stake of about 20 percent in BES. Espirito Santo International owns all of Rio Forte' capital.
Rio Forte's failure earlier this month to repay nearly 900 million euros (1.21 billion US dollars) in debt bought by Portugal Telecom forced PT to renegotiate the terms of telecoms merger with Brazil's Oi (1 US dollar = 0.7451 euro) (Reporting By Andrei Khalip and Sergio Goncalves, editing by William Hardy and Jane Merriman)