Portugal's BES bank apparently has enough financial reserves to weather the debt woes of its parent company. On Thursday, BES shares slumped on insolvency fears, raising the specter of a new eurozone banking crisis.
Portugal's central bank announced on Friday that the country's biggest lender, Banco Espirito Santo (BES), was sufficiently capitalized to deal with any negative fallout from the debt problems of its parent company, Espirito Santo Financial Group.
"There is no reason to doubt the security of the funds entrusted to BES, and its savers have no need to be worried," the Bank of Portugal said in a statement.
Fears over the health of Banco Espirito Santo boiled over on Thursday amid allegations that its parent company was covering up a hole of more than a billion euros in its accounts. Portugal's financial market regulator suspended trading in shares of the bank after they had plunged more than 11 percent to 0.54 euros ($0.73).
On Friday, BES said it had capital reserves of more than 2.1 billion euros, which should be enough to cover its exposure to debt in the Espirito Santo Financial Group to the tune of 1.18 billion euros.
The turmoil within the bank has created concerns in Portugal's capital markets, and Portuguese government bonds remain under stress.The International Monetary Fund (IMF) noted in a statement on Thursday
that Portugal's banking system had enduredthe eurozone debt crisis
without disruptions. However, pockets of vulnerability remained, warranting corrective measures in some cases and intrusive supervision in others.
uhe/nz (dpa, AFP)