The Portuguese Court of Audit: CGD was not controlled by the Finance department between 2013 and 2015

“The control enforced by the Ministry of Finance is not effective for all companies from the state corporate sector” – this was the blunt assessment made by the Portuguese Court of Audit, evaluating the quality of the control made by the Portuguese state to public enterprises. From the companies at stake, they highlight one – the public bank Caixa Geral de Depósitos.

“From the companies from the SCS [State Corporate Sector] in which state control was insufficient, Caixa Geral de Depósitos, S.A (CGD) stands out, representing approximately one third of the main portfolio of state’s social participations managed by the Ministry of Finance”, is read in the report published this Tuesday by the Portuguese Court of Audit.

On the same day the committee of inquiry to CGD’s management is resuming its works, the judges reveal the committee reports to CGD’s audit even “mention their exposure to high-risk matters”. However, such reference was to no avail: “There are no evidences the shareholder had requested any inspections to the Inspectorate General of Finance”, is stated in the document by the Court of Audit. Besides, “the accountability documents were approved based on incomplete information”, the judges add.

The report from the Court of Audit recalls that the current Legal Regime for Public Sector Companies (Regime Jurídico do Setor Público Empresarial), approved in 2013, “came from the need to intensify the control on the state corporate sector”, complying with troika’s rescue plan requisites. But only in 2015 was it possible for the Regime to start working with the minimum conditions; today, it is still not fully defined, namely concerning the monitoring mechanisms’ execution. The Regime’s field of action was broadened, but still, “by the end of 2015, it comprehended only about half the total amount of companies from the SCS”, experts say.

The court has concluded the State is not able to comply with his shareholder obligations to public enterprises. There are several “insufficiencies”, namely: “in signing management contracts, in approving the plan of activities, investments and budgets and in approving the accountability documents”.

CGD answers but is unable to convince judges

The public bank Caixa Geral de Depósitos assures that, unlike what the report states, they sent their quarterly reports made by their monitoring body in due time. However, judges maintain their statement that “there is no evidence of such reports being taken into consideration” by the Regime. Besides, these reports were only inserted in the system in 2016, all at once.

The bank’s administration argues that the CGD is already subject to the scrutiny of supervisory bodies from the financial system. But judges believe one does not overrule the other; besides, “prudential requirements do not prevent a potential bad management of credit institutions”.