Portuguese PM on BES’ former clients: “Sense of accomplishment”
António Costa held a conference-like presentation on the solution for the former clients of BES. He did not reveal a plan nor gave away any details, but says there is a “sense of achievement”.
The solution found for the former clients of the Portuguese bank BES appears to give away a feeling of “achievement”. The Portuguese prime minister says that the compensation of the former clients who lost money on BES’ commercial papers was not all that was at stake, but rather the credibility of the Portuguese financial system. These statements were made by António Costa in a sort of press conference presentation, in which he did not give away any details on the solution found, nor answered journalists’ questions, namely the most important: who will pay the former BES clients?
António Costa made no reference to this question and did not mention the Resolution Fund. The prime minister only states the solution found assures the financial effort will not be made by taxpayers. A private mechanism will be created in order to prevent any impact on the deficit. This special fund will be a banking loan. This credit should have a guarantee from the state and a counter-guarantee from BES resolution fund, assuring, therefore, the solution will not have any implications on the fiscal deficit. We should mention, however, that the resolution fund is a public entity and the respective expenditure and revenues are accounted for by the government.
"The original problem was not erased and the solution is not perfect, but I believe we played our part – our duty to assure justice, overcoming a conflict which made fragile the trust in institutions and in financial products in the market. We have now a sense of accomplishment. ”
What is, after all, the mechanism found? António Costa does not reveal it, and neither does Diogo Lacerda Machado, the spokes-person of the work group created between the CMVM (Portuguese Securities Market Commission), the Bank of Portugal and the AIEPC (Associação do Enganados e Indignados do Papel Comercial – Association for the Deceived and Outraged people of BES Commercial Papers).
From what is known, although unconfirmed, it is assured that clients who adhere to the solution will receive 75% of the amount they invested, with a maximum of 250 thousand euros, in operations up to 500 thousand euros and 50% for operations larger than 500 thousand. For example: for an operation of 400 thousand euros, 250 thousand will be paid for, since it is the maximum amount possible for that investment, although it is below 75%; for a 600 thousand euros operation, 300 thousand euros will be repaid.
The first tranche should only be paid from the second quarter of 2017 onwards, and it will be equivalent to around 30% of the amount each former client in entitled to. This percentage was a result of Deloitte’s considerations based on what normal creditors would receive if BES had been sold out on August 3, 2014, instead of following the path of resolution.
Lacerda Machado stated the solution found will need “a couple of months” to be implemented.
