Novo Banco report slams exposure to related parties, calls for changes

  • Lusa
  • 21 July 2021

The Government, BdP and Resolution Fund should "terminate situations verified regarding the auditor of the FdR, Novo Banco and Nani Holdings", recommended the comission.

A ban on exposure to related parties, review of the “grace period” between roles of regulator and regulated and more collaboration with parliament on banking information are some of the preliminary recommendations of the commission of enquiry into Novo Banco.

The deputy rapporteur of the Parliamentary Commission of Inquiry into the losses recorded by Novo Banco and imputed to the Resolution Fund, socialist Fernando Anastácio, presented this morning to the other members of parliament the preliminary version of the final report of this commission, a document of more than 400 pages seen by Lusa.

The parties may now submit proposals for amendments until Friday, with the discussion of the final report beginning on Monday of next week.

Closing the document, the rapporteur proposed 10 recommendations, with the first group of these addressed to the Banco de Portugal (BdP).

“The exposure to large risks to related parties emerged as one of the determining causes of the collapse of BES. He said the need to reduce or put an end to this type of exposure is an essential measure, especially to make the relationship of the companies in the so-called mixed conglomerates healthy”.

He suggested that the supervisor in this draft version “propose to the ECB and the government, concerning large risks to related parties, the prohibition of this type of financing, even if by creating a transition period for this purpose”, or that “this type of financing has a residual nature, never exceeding 5% of consolidated equity”.

The issue of ‘revolving doors’ was also discussed by the commission of enquiry, and the document said that, although they are not an impediment, “several situations of alternation between the exercise of functions in the regulator, the regulated, and the auditor, were identified”, which gives rise to “evident constraints”, as well as being seen by public opinion “as a factor of discrediting the institutions and their professionals”.

“The BdP should review the so-called ‘grace period’ applicable in the transition from the role of the regulator to the role of the regulated party, notwithstanding the standard followed by the Single Supervisory Mechanism – SSM, which has proved to be insufficient,” he said.

Another of the rapporteur’s proposals relates to “better and effective parliamentary scrutiny”, and it is necessary to “extend the duties of collaboration with parliament” in access to banking and supervisory information subject to the duty of secrecy.

The Government, BdP and Resolution Fund should “terminate situations verified regarding the auditor of the FdR, Novo Banco and Nani Holdings,” which is the same, as well as “regarding the company hired by the NB and FdR as Verifying Agent,” which had provided services to the Ministry of Finance in the process of the sale of the banking entity to Lone Star.