Portuguese television reports state aid for Banco Espirito Santo
Stricken Portuguese lender Banco Espirito Santo is set to be recapitalised using state aid, according to SIC, a Portuguese television station.
SIC did not offer a source for the information, but claimed an official announcement would be made this evening (3 August).
How Santo will be recapitalised is unclear: the government may decide to invest by subscribing shares or by providing a loan under the under the contingent capital regime. The loan would consist of bonds that would become stock if not repaid on time.
The bank was forced to raise capital this week after posting a €3.6bn loss. It suspended its shares from trading on Friday after prices fell 40 per cent.
While other Portuguese lenders requested state money in the heat of the financial crisis, Santo did not. Recently however it has run into trouble, seeing shares plummet as the ability of its parent company to financially support its debts has come under scrutiny.
These problems were compounded by insinuations of illegal activity by a former executive. Earlier this month 70-year-old ex-owner Ricardo Salgado, who ran the bank for 23 years, was arrested on charges of money laundering and tax evasion after accounting irregularities surfaced at Espirito's parent company.
Mr. Salgado had voluntarily acted as a witness in the investigation before he was arrested.