Legal
Swiss Regulator Initiates Bankruptcy Proceedings Against Espirito Santo

The Swiss Financial Market Supervisory Authority has initiated bankruptcy proceedings against Banque Privée Espírito Santo, the Swiss private banking subsidiary of Portugal's troubled Espírito Santo Financial Group. Separately, the Dubai financial services regulator has also restricted the ability of a local subsidiary of Espirito Santo Group to take or pay any deposits to protect its clients as the fallout from the collapse of the lender continue.
The Swiss Financial Market Supervisory Authority has initiated
bankruptcy proceedings against Banque Privée Espírito Santo, the
Swiss private banking subsidiary of Portugal's troubled Espírito
Santo Financial Group. Separately, the Dubai financial services
regulator has also restricted the ability of a local subsidiary
of Espirito Santo Group to take or pay any deposits to protect
its clients as the fallout from the collapse of the lender
continues.
FINMA said in a
statement that it had found the bank, which has been in voluntary
liquidation since July 2014, to be over-indebted.
The regulator said that the bank is in a position to rapidly and
fully reimburse privileged deposits to its clients up to
SFr100,000 ($106,000).
Earlier this month, FINMA launched an investigation into the role
played by Banque Privée Espírito Santo in the distribution of
securities and financial products of the Espirito Santo Group and
whether breaches of supervisory law had occurred.
“Current estimates indicate that the bank has sufficient
resources and liquid assets to fully reimburse its clients their
privileged deposits. The Depositor Protection Association
therefore need not be involved. Coverage of client deposits over
SFr100,000 will be determined during the course of the bankruptcy
proceedings. The majority of the bank's client deposits are,
however, privileged,” FINMA said.
“Enforcement proceedings against Banque Privée Espirito Santo to
examine the role played by the Swiss company in distributing
securities and financial products of the Espirito Santo Group are
still in progress,” the regulator added.
In July, Espírito Santo Financial Group agreed to sell its Swiss
private banking subsidiary’s client portfolio for the Iberian and
Latin American regions to Swiss-based private bank Compagnie
Bancaire Helvétique Group for an undisclosed sum.
At the same time, Banque Privée Espírito Santo announced it would
cease operations and go into voluntary liquidation. The move
allowed the bank to shorten its balance sheet and strengthen its
capital base. As a result of the measures, the bank's balance
sheet total has fallen from SFR600 million in June to SFr80
million.
Dubai
The Dubai Financial Services Authority, the regulator for Dubai
International Financial Centre, said in a statement that ES
Bankers (Dubai) Limited had been restricted from taking or paying
deposits and that the firm was required to maintain and preserve
its assets.
The regulator said the restrictions were considered necessary due
to the failure of Banque Privee Espirito Santo to honour
contractual commitments to ESBD and to repay deposits owed in the
normal course of business.
“The failure of BPES to honour its legal obligations has
seriously compromised ESBD's operations and solvency,” the
regulator said.
The new restrictions will prevent the bank from transferring any
assets to other ES Group companies and also require a manager to
act in place of the board of directors of ESBD.
The Dubai regulator also suspended the status of Espirito’s head,
Ricardo Espirito Santo Silva Salgado, as an authorised individual
as it no longer considered him to be a “fit and proper person” to
be a licensed director of the bank.
Banco Espirito Santo Group, which is headquartered in Luxembourg,
has been plagued by scandal in the past year. In July, Salgado,
stepped down as chief executive. Following this he was arrested
for alleged tax fraud and money laundering after an audit
conducted by Portugal's central bank found a number of financial
irregularities at the firm.
The Portuguese government announced on 3 August that it was
stepping in with a €4.9 billion ($6.44 billion) rescue plan to
rescue Banco Espirito Santo after it posted a first half loss of
€3.6 billion. As part of the bailout the Portuguese lender was
shut down and its healthy assets transferred to a new bank called
Novo Banco.