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Portugal's Largest Bank "In Serious Financial Condition" Auditor Warns
One of Portugal's biggest companies - Espirito Santo International SA - is in a "serious financial condition" according to a central bank driven external audit by KPMG identified "irregularities in its accounts." Rather stunningly, the details are nothing short of ponzi-like as WSJ reported in December that Espírito Santo International was highly leveraged and had been relying heavily on selling debt to an investment fund held by the financial group (i.e. funding debt issuance in one entity with another) and overvaluing hard-to-value assets (ring any bells?).
However, the 'ponzi-like' maneuver, as WSJ concludes shows that while legal and in line with regulatory rules, highlights how corporations, including banks, used financial gymnastics to survive the region's financial crisis.
Given the massive domestic bank demand for sovereign paper, one has to wonder if the sudden 60bps spike in Portuguese bond risk is a signal that all is not well in the European periphery.
Espírito Santo International SA, a large Portuguese conglomerate whose financial practices have been subject to criticism by outside experts, is in a "serious financial condition" and its accounts have "irregularities," according to a document published by one of the company's affiliates.
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A regulatory filing late Tuesday by Banco Espírito Santo, which is partly and indirectly owned by the conglomerate, said an external audit ordered by the country's central bank into Espírito Santo International's 2013 results uncovered a range of problems.
The auditor, KPMG, "identified irregularities in its accounts and concluded that Espírito Santo International is in a serious financial condition," the bank said in the prospectus that it issued as it prepares to sell €1 billion ($1.37 billion) of shares.
The details of the 'irregularities' are stunning in their ponzi-like nature...
The Wall Street Journal reported in December that Espírito Santo International was highly leveraged and had been relying heavily on selling debt to an investment fund held by the financial group and marketed to clients of the bank.
It also reported that accounting experts raised questions about the value Espírito Santo International gave to its stake in Espírito Santo Financial Group. The valuation was much higher than the market value of Espírito Santo Financial.
While the bank isn't responsible for the parent company's problems, the filing warned, the bank nonetheless could face reputational damage.
Perhaps that is why the sudden rush for the exits in the increasingly tied-at-the-hip sovereign bond market has occurred recently...
If one goes - the other follows...
As WSJ noted in December, this kind of ponzi-like move remains widespread... and entirely ignored by most...
But the maneuver, while legal and in line with regulatory rules, highlights how corporations, including banks, used financial gymnastics to survive the region's financial crisis.
As the mirage of recovery in financials is maintained by the totallifting of all accounting standards and transparency.
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if you dig deep enough dont be suprise to find the fingers of Goldman Sachs there ... just like in Greece
Looks like Portugal is about to be Cyprused.
But...but..spiderman towels.
http://www.zerohedge.com/news/broke-bankia-runs-out-toasters-it-has-bold...
Being portuguese I can tell you that things ARE NOT OK AT ALL... The Govt proclaimed "victory" and the Troika is gone, but:
A) unemployment is still at a record high (despite their efforts to manipulate all employment stats)
B) taxes are as high as they have EVER been and Govt spending is not lower than before
C) Portuguese debt is INCREASING at an EXPONENTIAL rate, despite all austerity (they only fucked the poor and middle class), in absolute numbers and in debt to GDP ratio
D) Portuguese banks' financial data shows that they are going DOWN IN FLAMES. From the 78 billion Euros of the Bailout, about 13 Billion (not a definitive figure) went to Banks...
E) JP Morgam and Goldmn Sachs have fingers in MANY pies here in Portugal, especially in the "Privatization" deals
F) Portuguese politicians are just setting the stage to vacate the "LOT" and put a big "FOR SALE" sign at the borders...
Right on.
In Portugal, the director of entity that manages public debt (IGCP - Agência de Gestão da Tesouraria e da Dívida Pública - IGCP, E.P.E) is João Moreira Rato that had been executive editor of Morgan Stanley and passed also by the bankrupt Lehman Brothers and Goldman Sachs... So we have a big Rato (Rat) managing the public debt and the rest of the rats stuffed into "privatization" deals.
I can be said that we need pest control.
...
Speaking of ponzis, what's the latest from the Fed? Wonder why Rupert's WSJ doesn't discuss similarities in systems?
Well, then it's a good thing that there is no risk of any sort of "credit event" occuring...
roll the motherfucking guillotines already,
nothing changes otherwise.
The guillotines didn't change anything either.
Plus ca change plus c'est le meme chose.
There isn't a western bank that isn't a "ponzi-like structure". The whole western economy is nothing but a large ponzi scheme.
if thats the case, it has been working fine so far ... why fix it, when ain't broken?
Well one thing is for sure, these fuckers are not going to indict themselves...
My bank is in serious shape also. I better give Sleepy's a call. It's still under warranty.
Free Spiderman towels?
No no no...it's Godzilla time.
Bring it on. I want to see the crackup boom before I die!!!
http://www.youtube.com/watch?v=Sx7D8p-AoEs
Wake me up when a big bank ISN'T saved by their captive government putting a gun to the head of THEIR captive people.
pods
This information does not seem to be preventing Wednesday from becoming the new Tuesday.
Looks suspiciously like the " allegedly well financed " Creditanstaldt , circa 1931.
Sell the spik on the CDS and buy the dip on debt.
Trickle down corruption all emanating from fundamental federal reserve practices, and thats just for starters. From paulson to corzine on down to tiny tim the toxic avenger, international bankers have many experiences to draw on in terms of pushing limits and finding creative ways to excuse financial exploitation.
KPMG? I would first have their audit audited.
Cataplana anyone?
....yum... make mine with pork shoulder and clams !
Sounds like a TBTF bank with an unphukkable lard arse...a sign of the times!
BPI is in a worst shape,
and Totta too = Santander Trapped
No surpris-o!
Maybe this is why Deutshe Bank has been diluting shares to raise capital. How deep are they involved in this?
Isn't this a case for the the ESM?
European taxpayers can expect a phone call soon, better keep their chequebook within reach..
what a joke this alarming news is dated Dec 12 th 2013 - isnt that just a little bit toooooo old to make it into the zero hedge news lines ?
Ex-GM engineer posted this one....
ZH needs to do background checks....
Shit hit the fan in the last few weeks in the Portuguese press, after the Portuguese Central Bank pressure for the bank to come clean.
So no, it is not "toooooooo old" to make it into the ZH news.
Also, not sure if relevant but... BES was the only bank NOT using loans backed by the goverment to strenght their balance sheet.
Payback, perhaps?
How is this news alarming? It's the new norm for banks to be overextended and prone to collapse. It wouldn't matter if this was posted in Dec '13, Dec '11, or yesterday. I barely raised an eyebrow.
It might surprise you but some people on this blog actually have made the connection that in a shrinking global economy, with limited growth prospects, banks with significant leverage and default risk would need nothing short of a miracle to avoid collapse.
In the US that "miracle" will be PM holdings and student debt that cannot be extinguished. That is their ultimate bottom-line insurance policy. Everything else is prone to evaporation as it shifts to reflect fire-sale market values.
This is all a fucking joke, they may as well be using Monopoly money over there. And everywhere else for that matter...
Dated this portugese hottie for a while. Very passionate in bedroom, short fuse (which was actually a benefit because always ended with sex) and staunch defender of socialism (which lead to more arguments and more sex)...
LOL That's all I have to say just this article reminded me of her and how hot she was. Thanks ZH!
What was his name again!?
Haven't done much digging yet but another ZH'r here mentioned that BES was found to have laundered money for terrorist groups. Supposedly it was announced in the news over there yesterday. If someone knows which Portuguese news sources to dig through.
http://www.zerohedge.com/news/2014-05-20/banking-buffoonery-modeling-mys...
Maybe it has something to do with this and not closing said holes.
http://theportugalnews.com/news/bes-fined-11-million-by-spain/31042
Portuguese financial institution Banco Espirito Santo (BES), was fined €1.1 million last year by Spain for “very serious” breaches of a rule preventing money laundering, it was announced on Monday.
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The fines, published in Monday’s edition of the Boletim Oficial de Estado (Official State Bulletin), correspond to a resolution passed by the Money Laundering and Monetary Infringement Commission.
There were two fines of €150,000 and €960,000 for "breach of duty to communicate the prevention of money laundering and financing of terrorism".
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Little interesting aside.
http://theportugalnews.com/news/banks-rule-out-major-gold-sales-at-prese...
The European Central Bank and the 20 national banks in the euro system, including the Bank of Portugal, announced on Monday that "at present, they have no plans to carry out significant gold sales", after the signing of a fourth accord on the subject.
In a statement, the ECB said that the signatories of the accord "declared that gold will continue to be an important element in world monetary reserves" and that "they will continue to coordinate their operations with gold to avoid market disturbances".
This fourth accord, which takes effect on 27 September this year, after the expiry of the one currently in force, bars its signatories form selling more than 400 tons of gold per year - or more then 2,000 tons over its five-year term, as with the current accord. The accord is to be reviewed within five years.
The signatory banks are those of the countries that share the euro, including Switzerland's and Sweden's respective central banks.
The accords on sales of gold were instituted in the wake of the slump in the price of the metal on international markets in 1999, at the time of the launch of the euro.
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Do as I say not as I do is how the empire exploits the outer territories like the US. You never shit where you eat.
just bail them out - problem solved!
Down 10% this morning Ouch!