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Portugal to give $6.58 billion to save Banco Espirito Santo

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Staff writer ▼ | August 4, 2014
The European Commission said on that Portugal's planned $6.58 billion rescue of Banco Espirito Santo (BES) was in line with EU state aid rules.
Banco Espirito Santo
BES   EU gives green light to Portugal
"The adoption of this resolution measure is adequate to restore confidence in financial stability and to ensure the continuity of services and avoid potential adverse systemic effects," the Commission said in a statement.

The Commission said a disorderly resolution of BES could have created a serious disturbance in the Portugues economy and that the creation of a temporary credit institution, holding deposits, senior debt and most of the assets, was a suitable remedy.

To limit market distortions, the latter's new business would be limited, it said.

Under the plan, Banco Espirito Santo, or BES, will be split into a "good bank", renamed Novo Banco, and a "bad bank", which will house BES's exposures to the troubled Espirito Santo business empire, which last week tipped the bank in to a record 3.6 billion euros loss.

The bad bank's losses will be born by the bank's junior bondholders and shareholders, including the Espirito Santo family, which has a 20 percent stake, and French bank Credit Agricole (>> CREDIT AGRICOLE) which owns 14.6 percent.