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.
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.