Portugal's Small Investors Count Cost of BES Collapse
Albino Gomes looks despairingly at his two-hectare lettuce farm north of Lisbon and wonders where he is going to find money for fertilizers this year.
He had put his savings into what he was told was a "risk-free investment with guaranteed returns" at Banco Espirito Santo, one of Portugal's biggest banks.
But the bank collapsed in August, and at least 500 million euros ($540 million) of investments by 5,000 clients like Gomes went up in smoke.
"My bank counsellor assured me that it was a risk-free investment, with guaranteed returns. But today I have almost nothing left," said the 73-year-old.
"I can't sleep anymore. I'm thinking about it all the time," he said.
With a pension of just 410 euros a month, he has no spare cash to keep production going, forget about fixing the bumpy roads or replacing the torn plastic awnings at his farm.
In cruel irony, he now plans to go to Novo Banco -- the new bank that rose from the ashes of BES -- to borrow money so he can keep farming.
BES collapsed after reporting a record loss last year and its three holding companies declared themselves insolvent, facing allegations of accounting fraud.
The bank's woes threatened to drag down Portugal's economy, which had only gingerly emerged from a three-year bailout, prompting the government and the European Union to swiftly come to the rescue.
As part of a state bailout, the good assets of the ailing bank were transferred into Novo Banco while BES, which was left holding the bad assets, would be closed down.
Lisbon wielded new EU rules to shield taxpayers and governments from having to pay for the rescue, leaving shareholders and second-line creditors to carry much of the cost in the BES collapse.
However, small investors like Gomes were not protected by the European rules as the state's 100,000-euro deposit guarantee is not valid for those who have put their money in high-risk financial products.
As a result, Gomes's investment may have reached maturity on October 31, but he has had no news about it from the bank. His latest statement is void of entries and the balance stands at zero.
- 'We are guinea pigs' -
When it emerged that BES might be running into financial problems, the Bank of Portugal required it to set aside provisions, a sum which eventually reached 1.25 billion euros, to protect small savers and investors.
But the central bank now says that "this provision does not constitute a guarantee of repayment".
Investors battling to get their money back charged that the central bank is backtracking because it wants to ensure Novo Banco -- which has since been put on sale by the state -- fetches the best price possible.
"Unfortunately, the capital ratios of a bank are seen as more important than the distress of human beings," said Carlos Lucena, a lawyer who represents many of BES's clients who lost out.
Novo Banco had in August signaled its intention to repurchase bonds from small holders.
But its boss Eduardo Stock da Cunha later said it was "not up to Novo Banco to pay" and that he is "working towards a solution".
The change in tone has plunged thousands of savers into despair.
"There is deep anguish. They are surviving thanks to anti-depressants. Their nightmare is the bank agent who duped them," said Mario Gomes, son of Albino Gomes.
He is also vice chair of an association of 500 clients who claim to have been wronged by BES. The group has in recent weeks stormed branches of Novo Banco, shouting "thieves", "crooks" and "we want our money back".
"We are the guinea pigs of the new European bank rescue system. Portugal is a poor country, they treat us with contempt," said Antonio Nunes, 68, who has been a client of the BES for 45 years.
He had invested 100,000 euros -- the savings of his father-in-law, his daughter and himself -- for his grandchildren.
In fact, a day after doing so, he had been gripped by doubts and had returned to the bank to cancel his investment. But the bank had told him that "it is a safe investment".
Source: Agence France Presse
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