Nightmare in Lisbon

Banco Espirito Santo’s collapse in Lisbon came after it unveiled losses on loans made to an assortment of companies run by its founding family. The broader Espirito Santo group, which included tourism, health and agriculture companies, sought bankruptcy protection and began liquidating last year. Portuguese prosecutors have since launched an investigation into the company’s collapse. New management put in place at Banco Espirito Santo by the central bank has said they suspect the lender engaged in illegal behaviour.
With the bankruptcy of Banco Espirito Santo and the creation of another financial institution with the good assets (without toxic assets) of BES emerged Banco Novo (New Bank) that will be sold to the highest bidder.
There are 17 contenders.
Chinese brokerage Haitong Securities Ltd. is in talks to buy BES investment banking unit as Chinese finance firms snap up more overseas assets to try to offset slowing growth at home.
A purchase of the bailed-out Portuguese lender’s unit would be Haitong’s first acquisition outside China and Hong Kong as Chinese financial companies scoop up assets of Western banks hammered by bad debts.
The Bank of Portugal has said it wants to sell Novo Banco in the second quarter of this year, allowing for the quick recovery of the 4.9 billion euros (US$6.1 billion) of public funds used to rescue BES last August after it nearly collapsed under the huge debts of its founding family.
Novo Banco was carved out as a ‘good bank’ from BES, while BES itself has retained the toxic debts from the Espirito Santo family that sparked the collapse of the family’s business empire. The collapse has led to an investigation into how the family amassed such huge debts and how it contributed to the near collapse of BES.