IN April this year, Ana Gomez, a Portuguese politician and a member of the European parliament, submitted a written question to the chair of the European Central Bank (ECB) Supervisory Board on the ‘staged bankruptcy’ of Banco Espírito Santo Angola (BESA).
She asked : ‘I write to you with an alert concerning the declaration of bankruptcy of “Banco Espírito Santo Angola” (BESA), the Angolan subsidiary of the collapsed Portuguese bank “Banco Espírito Santo” (BES).
‘According to Mr. Sobrinho’s testimony, BESA staged its bankruptcy only to open a new bank – “Banco Económico” – in Angola. The staged bankruptcy offered the opportunity to push away the Resolution Fund from the new shareholder composition of “Banco Económico”: when Banco Económico launched a capital increase, the Portuguese representative, sent by the Resolution Fund to attend the shareholders’ general meeting, was road blocked in Luanda and prevented from attending. This act prevented the Resolution Fund from maintaining control over Banco Económico and left the Portuguese capital with mere 9% of the bank.
‘The current shareholder structure in Banco Económico also proves that an Angolan triumvirate of corrupt individuals maintains control over the bank.
‘Taking this into account I ask: Will the ECB find out what have the Portuguese authorities – Government, administration, judiciary, Central Bank and Novo Banco – done to ensure recovery of the over €3 billion of assets lost with BESA transformation into Banco Económico?
In the same month, the Portuguese central bank, the Bank of Portugal (BdP) imposed a €6.8 million fine on BESA’s parent bank, Banco Espírito Santo (BES) and three of its former managers for the omission of mandatory communication of the problems associated with BESA portfolios.
BES also received a fine of €400,000, Salgado a fine of €1.8 million, Pires, €1.2 million and Silveira, €400,000.
The BdP said, “Particularly serious infractions” took place between 3 October 2013 and 3 August 2014, before the resolution of BES, which happened on 4 August that year.
The central bank also levied a €3 million fine to the audit company KPMG, which audited BES, for providing incomplete and false information to the supervisor, before the bank’s resolution in the summer of 2014. In addition, two KPMG officials were also convicted ‘for particularly serious infringements.’
According to BdP, the auditor was aware of the risks related to credit portfolio of BESA and the problems it caused to BES in Portugal, not having transmitted that information to the supervisor.
The above are some of the far-reaching repercussions of the scandal of BESA since its collapse in 2014 after 12 years of operation. And they don’t end there – Africa Briefing understands that Angola’s attorney-general has re-opened the investigation into the events that led to the fall of BESA. According to the Portuguese Expresso newspaper, the judicial authorities want to know what led to the creation of a $4 billion hole in the institution and are asking for new information and are being ‘helped’ by Portuguese judicial authorities.
In the few years before its collapse, BESA became critically dependent on its parent bank BES for funding because of its extraordinarily high loan/deposit ratio and deteriorating loan book.
‘On the face of it, Portuguese investment in Angola makes sense. Angola is oil and mineral rich, and has experienced fast economic growth in recent years, though its economy has slowed recently due to falling oil prices. As the former colonial power, Portugal has strong historical and cultural ties to Angola,’ financial writer Frances Coppola said in an article for Forbes in August 2014.
She described BESA as undoubtedly a ‘partner of the state’, though not because it had invested productively in the Angolan economy. ‘No, it is because it has done its duty by the Angolan powers-that-be,’ she wrote. According to the investigative journalist Rafael Marques de Morais at makaangola.org, much of BESA’s loan book was made up of loans to Angolan political interests.
Like all Angolan banks, BESA lent excessively: its loan portfolio doubled in size between 2010 and 2012, leaving it with a loan/deposit ratio of about 200 percent. The quality of the loan portfolio deteriorated rapidly, raising concerns about its solvency and liquidity. The Angolan state news channel reported in December 2013 that the shareholders had agreed to recapitalise the bank to the tune of $500 million. At around the same time the Angolan sovereign guaranteed up to $5.7bn of loans on BESA’s books, though the official news channel made no mention of this.
During Álvaro Sobrinho’s tenure as chairman of the bank’s executive committee (2002-2013), BESA took to granting astronomical loans, mostly to well-known figures in the Angolan regime, including several members of the ruling People’s Movement for the Liberation of Angola (MPLA) Politburo. Since 2013 the chairman of BESA’s board is an MPLA Politburo member, António Paulo Kassoma, who has served as prime minister and speaker of the National Assembly.
According to information obtained by Maka Angola, the bank had made loans totalling nearly $200 million with Álvaro Sobrinho as the main beneficiary. The bank now wants to recoup this loan.
Eugénio Neto “Geny Neto”, the vice chairman of Espírito Santo Commerce (Escom) in Angola, was named as the ‘facilitator’ in granting loans to the top echelons of the MPLA. He himself also received loans from BESA worth $500 million. Escom is part of the Portuguese Grupo Espírito Santo, the parent company of Banco Espírito Santo, which was the majority shareholder of BESA with 51.94 percent.
BESA’s loans to leading regime figures are now considered ‘toxic debt’ since they are very unlikely ever to be repaid. The size of the financial hole created by Álvaro Sobrinho was unknown even to the Portuguese headquarters of Banco Espírito Santo (BES) until his term as chairman ended.
To save the bank from collapse, the Angolan government had to grant BESA a sovereign guarantee.
Both the BESA management and BES were secretive in their handling both of the crisis and of the scandal surrounding it, fearing that any information that got out could further damage BES’s already fragile image on the international stage.
The public revelation of BESA’s current crisis could also damage the credibility of Banco Valor, which Álvaro Sobrinho acquired after standing down as chair of BESA.
The Angolan Central Bank has also adopted an attitude of secrecy in dealing with the affair in order not to harm the image of the national banking system abroad.
Sobrinho also has significant investments in media. In Portugal he owns the Sol newspaper and a 15 percent share in Cofina, a company that owns the newspapers Jornal de Negócios and Correio da Manhã. He has shares in Imprensa, the company that owns SIC television and the weekly Expresso. In Angola he owns the papers Novo Jornal and Agora, among others.
Sobrinho claims that BESA’s collapse was a political decision, not over a state of insolvency.
‘The bank bankrupted due to a political decision taking into account the people that were involved in it, that’s why I say it was a political decision,’ he told Angola Public Television (TPA) on September 12.
Sobrinho also wondered whether Besa had really gone bankrupt, because, according to him, from the formal viewpoint the bank still exists under another name (Banco Económico) and regarding the practical side there was not any international, independent, state-owned or auditing institution that declared the bank insolvent.
He also explained that the bank had been subjected to an auditing process in 2011 by the European Bank, which did not raise any red flags.
However, he added, the idea of an eventual bankruptcy came from the shareholders, whose bankruptcy was never declared by the National Bank of Angola (BNA), KPMG auditors, fiscal council or any other international regulatory body.
As regards the institution’s accounts, Sobrinho said that since the bank began operating in January 2002, it always introduced positive liquid results until the day he left the institution in 2012.
With the re-opening of investigations by the attorney-general, the saga may be far from over.