A word on Banco de Portugal

As the Portuguese central bank, BdP should be the central guarantee of Portugal’s finantial system. Still, over the last few months, a number of worrying situations as occurred, the ones BdP should prevent.

1) Today’s announcement that Banco Português de Negócios will be nationalized as from tomorrow, is the last word on a very confuse situation evolving this bank – and a clear sign BdP should have acted earlier. BPN has always been a somewhat misty institution, a less than clear actor in Portuguese banking system, with a confuse shareholder list, not fully-disclosed operations, an aggressive stance on companies acquisition and an incredible list of exotic actives (including an impressive collection of Miro’s modern art paintings). In 2003, Deloitte (BPN auditor at the time) had already issued an alert to the extreme weakness of some of the bank’s ratios – not only BdP didn’t act on the warning, but it also let Deloitte relationship with BPN be terminated and replaced by a new auditor (which never issued any warning nor acted on what we now know was irresponsible banking management). Still, despite this incident, and the surmounting and increasingly worrying news that were coming from BPN, never (before June this year, after a very harsh warning from BPN new Board, directed by Miguel Cadilhe, a former Portuguese Finance Minister) as the BdP acted or investigated or audited BPN by itself;

2) A similar attitude was taken on BCP issue. We now know that BCP has acted on a very unclear way in a number of occasions, namely funding the buying of its stocks by investors in order to strengthen the ‘decision hard core’ and undisclosed offshore operations. Despite the high profile of the bank and its much speculate driven high share value, the BdP never audited the bank’s bills or operations;

3) Over the last few years, Portugal has steeply increased its debt ratios, that now surmount closely to 90% of the country’s GDP. Default situations are on the rise, together with loans signed on to pay for other loans,… Still BdP is failing to take any way of action on this problem, particularly on luxury or near-luxury products acquired through high-interest credit to consumption.

These 3 issues, unrelated should be enough to call for action on Banco de Portugal way of dealing with the nowadays and actual situation of the Portuguese economy, but special the financial system it regulates. We all should pay close attention to this issue on the next weeks.