Saturday, November 22, 2014

The first ’round’ the fight for truth in BES case – Economic

The first 'round' the fight for truth in BES case – Economic

Maria Ana Barroso and Filipe Alves



 The first & # x2018; & # x2019 round; the fight for truth in BES case

The first round of hearings in the Parliamentary Commission of Inquiry to the biggest financial scandal of the Third Republic left many questions unanswered.

The Parliamentary Commission of Inquiry to management acts in BES and GES began this week with the hearings of the Governor of the Bank of Portugal (BoP) Carlos Costa, the deputy governor Pedro Duarte Neves, the president of the CMVM Carlos Tavares, the Finance Minister Maria Luís Albuquerque, former Minister Teixeira dos Santos and the President of the ISP, José Almaça. In this first round of hearings, reporting personalities were concerned not to assume blame for any faults and were many unanswered questions

Option:. Resolution
The decision to moving on to the resolution, as opposed to public recapitalization hypothesis, has been a central theme of the investigatory committee or was this a parliamentary investigation and therefore with strong political weight. Beyond partisan issue, the fact that it has opted for a never before attempted option in the European Union 1 and the consequences and final bill have yet to see even justify that the subject is in the center of the discussion. The two main actors of this episode in the history of BES – out Vítor Bento has not yet been heard – came up with the same version, that was the precipitation of events that made the resolution the only possible solution, with Maria Luís Albuquerque to say yet that no one was ever ask you to resort to state aid. It is precisely here that ended the first round of hearings, is of prime ‘mysteries’ and that, despite the insistence of members these days, remains unclear. How could bop deciding to resolution without prior consultation with the Finance 2, given that a state loan was necessary for the resolution fund? And when the time left, actually, to be able to realistically put on the table the possibility of a private interest to strengthen the capital of BES ? It was really only the July 30?


reputation
The issue of withdrawal or not the suitability of the former managers of BES , 3 as well as the analysis of what each supervisor could not do in this area was also of scrutiny of Members. The bop was at the center of this discussion. Pedro Duarte Neves, Deputy Governor, said that the evidence “were not sufficiently clear to advance with light suitability process of what is the case.” And that bop “used the information at its disposal to force out Ricardo Salgado.” Carlos Costa had a similar speech, speaking in a “real trial of iron” with the former leader of BES . The president of the ISP was asked why he continues in office the same management of Tranquility. “I can not make the mistake of having a company without shareholders and without administrators. Without trust the company does not work,” he argued. “In due time we will address this issue. We are collecting information,” said José Almaça on allocating responsibility, the ISP expects to complete by the end of the year.

Exam to past acts of BES
No, this was not even close or far the central theme of the hearings this week. Members wanted to see, especially the responsibilities of the various supervisors and policymakers – present and former – in the case. And the latter have tried not to make too many judgments at this stage, to the risks that entails. Anyway, for better or for worse, the first line of any institution or company are its managers, followed by the different levels of supervision. Still, there were some considerations. Carlos Costa said there are “signs of fraudulent management acts in the placement of debt by foreign entities.” And the bop already initiated several disciplinary procedures, “protected by the secrecy of justice”. The governor also said that began in September 2013 “all the evidence investigation process may have an impact on the suitability of their administrators” BES . And that “the work of the forensic audit are at an advanced stage”, with the aim “to establish and document evidence of any serious malpractices carried out by BES Group or members of its governing bodies. ” “There was a clear disobedience within the BES to the determinations of the Bank of Portugal,” said, for example, the Minister of Finance. But the former Minister of Finance of Socrates, Teixeira dos Santos, there was remembering that “if someone wants to fool the supervisor, wrong. And hides.” And because the management decisions that may be involved are not limited to what happened in BES , also president of the ISP was questioned. On the decisions taken at Tranquility to apply funds in debt GES, the President of ISP said that they “seriously undermined the status of technical provisions” of the company and that “he who has the power to make these decisions is the executive committee.

BES and BES
Angola
What happened after all, the BES Angola 4 is one of the essential themes of what happened in BES . Not only for the possible political implications as the many ‘gray areas’ in this case. But even the huge impact that credit to the BES Angola had in the fall of BES . The governor of bop says that one of the files that is the basis of “disciplinary procedures” that the supervisor has in place, and are in judicial secrecy, is the research “relationship between BES and BES Angola” and there is a “risk of money laundering.” However, the veil is yet to rise. Including on sovereign guarantee to BES Angola credits , that while it was “irrevocable”, turned out to be torn by the Luanda authorities.

Communications with Brussels
Calendar resolution process has been one of the strong themes of the committee. In early October, the Economic reported that the Directorate General of the EU Competition (DG-Comp) opened the process of State aid BES on the night of 30 July 5, minutes after the presentation of the half-yearly loss of 3.6 billion. The news has questioned the official version of events and the governor of bop hastened to ensure that there existed any decision before 1 August and to say that the supervisor “does not correspond with the DG-Comp”. But the commission, Carlos Costa admitted that on July 30, “was established a first contact with DG-Comp on an informal basis, in which were discussed the different contingency scenarios that would involve State aid.”

Communication between supervisors
The BOP will not inform the CMVM 6 about what was going on, either with regard to the steps that made the GES in the months leading the resolution of the BES (Carlos Tavares said it was only notified of the audit of the ESI in May by the Luxembourg authorities and not by BoP) or about the measures applied in week prior to the intervention. Having been kept in the dark about what was being prepared, the CMVM does not consider it necessary to suspend the BES , which lost about 70% of its value in the days before Resolution, on 3 August. Asked on commission, Carlos Costa said: “What had been combined and which is in line with what is expected, is that communication to the CMVM must occur after the decision However, when I left the meeting of the Board of Governors [in. Friday, August 1] and saw the sharp drop in shares, I was careful to call the president of the CMVM to tell him he should suspend the price. ”
The president of CMVM confirmed it had received a call at 15H12 on Day 1, Friday, in which Carlos Costa warned of the risk of information leakage, without mentioning specifically what would go with BES . And he said, similar to what had already made the governor that “the primary responsibility [for the communication of relevant facts] is the issuer”, ie the BES . Carlos Tavares was keen to stress that “if the CMVM had more information before it would have been prudent to stop trading”. In turn, the President of ISP said to have been aware of resolution plans BES on Saturday, August 2, the day before the official announcement.

The capital increase
Members also sought to establish responsibility with regard to the fact that regulators have allowed BES carry out a capital increase 1,045 million between May and June. The operation completed only a month and a half before the resolution of the bank and both the BoP as the CMVM have been criticized. In the committee, Carlos Costa defended criticism noting that its role is to ensure that banks have adequate capital ratios and it behooves the institutions define as reinforce, whether by capital increases with issue of new shares, either by sale of assets or other measures. Already Carlos Tavares recalled that the CMVM forced BES to refer the prospectus problems detected in the ESI, although without quantifying the value of the ‘hole’ in the ‘holding’. “The CMVM does not approve capital increases,” said the president of the CMVM. Tavares also rejected responsibility for the commercial paper issued by the GES, because they are private placements.

BES record Losses
The semi-annual losses of BES (EUR 3.6 billion), which precipitated the resolution of the bank, were also discussed in committee. The governor was assured several times throughout the month of July, which BES was “solid”, based on the data of 11 July. However, KPMG detected in the second half of the month, a GES financing scheme by issuing bonds BES that were placed with customers, with repurchase promise (via Eurofin and other intermediaries). Carlos Costa said the BoP only learned of the “preliminary” values ​​of these losses that broke the capital ratios of the bank at the end of July 25, by KPMG, being taken by surprise.

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