August 5, 2014 / 10:01 AM / 4 years ago

Portugal watchdog investigates alleged insider trading in BES

LISBON, Aug 5 (Reuters) - Portugal’s securities market regulator has opened an investigation into possible insider trading that may have caused Friday’s collapse in the shares of Banco Espirito Santo before the authorities rescued the troubled bank on Sunday.

The CMVM said it was investigating “signs pointing to ... the use of privileged information before the suspension of trading” which was ordered by the regulator on Friday.

“CMVM will inform the public prosecutors office about any evidence of illegal criminal practices found or to be found” during the investigation and supervision process, it said.

Shares in BES plunged 42 percent on Thursday after the bank booked a 3.6 billion euro loss due to its exposure to the crumbling business empire of its founding Espirito Santo family. On Friday, they seesawed until early afternoon before slumping another 40 percent, which was when the CMVM suspended trading.

The rescue plan for Banco Espirito Santo, unveiled late on Sunday, involved an injection of 4.9 billion euros mostly via a state loan and splitting the lender into a “good bank”, renamed Novo Banco, and a “bad bank”, housing BES’s exposures to the family business and other problem assets.

Shares in BES, which is now the “bad bank” to be wound down, remain suspended, but BES is still a listed entity, the CMVM said. The regulator is waiting for more information on the implications of the rescue plan to decide on whether to delist its shares or lift the suspension.

France’s Credit Agricole said on Tuesday it took a 708 million euro hit reflecting BES’s losses and impairment charge on the value of its 14.6 percent stake in BES, which it wrote down to zero.

The Bank of Portugal has said BES’s top risk management, complicance, supervision and audit officials have been suspended over suspected “harmful management.” It has set up an independent audit of BES. (Reporting By Andrei Khalip. Editing by Jane Merriman)

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