* Banco Espirito Santo CEO steps down
* Proposed replacement seen as close to him
* Founding family no longer majority owner after recent
(Adds formal resignation, proposed board chief, analyst on
By Laura Noonan, Sergio Goncalves and Andrei Khalip
LISBON, June 20 The founding family of Banco
Espirito Santo has accepted their patriarch Ricardo
Espirito Santo Salgado must step down as chief executive of
Portugal's largest listed bank, proposing the chief financial
officer as his successor.
BES said in a statement that ESFG, the company
that holds the family's 25.05 percent stake, would put forward
Amilcar Morais Pires, 53, as 70-year old Salgado's replacement
at a shareholders' meeting on July 31.
ESFG said Salgado had submitted his resignation from the
executive committee along with other family members, including
his cousin Jose Maria Espirito Santo Silva Ricciardi who had
previously tried to unseat Salgado via a confidence motion.
Earlier, three sources familiar with the matter had said the
Bank of Portugal had pushed for Salgado's resignation following
the discovery of financial irregularities at a holding company
that owns a stake in BES. The central bank was also concerned
with the power struggle within the family, local media said.
Salgado has said he and the bank knew nothing about any
irregularities at the holding.
The Bank of Portugal said only that it would now await the
bank's new internal governance model for evaluation after its
approval by BES shareholders.
The proposed new CEO is seen as a person close to Salgado,
who will also chair a new consultative committee at the bank.
A source familiar with the matter said BES's entire board
would step down imminently and shareholders would be asked to
approve a new board, chief executive and chief financial officer
at the July meeting.
BES said on Friday ESFG would also propose that family
members be represented on a consultative committee that would
also be open to other BES shareholders. The second-largest is
French bank Credit Agricole.
Portugal's market watchdog CMVM, which had suspended the
bank's shares on Friday morning amid reports of Salgado's
departure, re-opened trading in the shares at 1330 GMT. They
fell to close 3.7 percent at 0.879 euros, adding to Thursday's
2.7 percent fall.
NOT TOTAL RUPTURE
Albino Oliveira, an analyst at Fincor brokers, said the
proposed changes were less aggressive than some in the market
had feared and did not rule out a recovery in the share price
after the recent hammering.
"Considering that Salgado stays (on the committee), the
decision is neither continuity nor total rupture. The market
will wait to see what ideas the new CEO will bring," Oliveira
The bank's governance has been under intense scrutiny since
central bank regulators discovered that retail clients of BES
had been sold bonds that were used to fund the activities of a
company related to the Espirito Santo family.
Portugal's' only banking dynasty, which began with a
money-changing business in 1869, lost control of the bank after
a 1.1 billion-euro ($1.4 billion) share sale last week but is
still its largest shareholder.
Under measures agreed with the central bank, which is
responsible for vetting banks' leadership, the family will have
no representation on the new board, the source said.
A source familiar with the process said that the new BES
directors would be a mixture of international and local
professionals without any conflicts of interest.
ESFG also proposed to appoint Paulo Cardoso Pinto, a
parliament deputy for the ruling Social Democratic party and
former Constitutional Court judge as chairman of the board.
The Espirito Santo family still controls many other assets
in the country through a complex array of holding companies, and
family members sit on several Portuguese company boards.
This month's capital increase, presided over by Pires, drew
strong investor demand even though the sale prospectus, issued
in May, spoke of "material irregularities" involving Espirito
Santo International (ESI), a Luxembourg-based holding company
through which the family holds part of its stake in the bank.
The prospectus said the irregularities affected the
"completeness and trustworthiness" of ESI's accounts.
BES has said it is insulated against the problems at ESI,
and when Bank of Portugal discovered that bonds linked to a
family company had been sold to the bank's clients it pushed the
bank to quickly redeem the bonds.
($1 = 0.7336 euros)
(Writing by Andrei Khalip; Editing by Robin Pomeroy)