Shoddy Supervision

premium

In Bailout of Portuguese Bank Espirito Santo, Europe's Faulty Financial Oversight On Display Again

Vitor Bento, CEO of Portuguese bank Espirito Santo. Source Espresso
Shareholders of troubled Portuguese bank Banco Espirito Santo in July named Vitor Bento, a respected economist, as the bank's new chief executive.
  • Why it matters

    Why it matters

    Public and investor confidence in Europe’s banks and governments is likely to drop further unless regulatory oversight improves.

  • Facts

    Facts

    • Banco Espirito Santo is being kept alive by a €5-billion loan from the European Union, the European Central Bank and the International Monetary Fund.
    • The financial bailout, six years after the collapse of Lehmann Brothers, underlines the still fragile state of European banking sector.
    • The problem of banks being “too big to fail” remains unsolved in Europe.
  • Audio

    Audio

  • Pdf

It’s happened again. A major European bank has to be bailed out with taxpayer money.

The Banco Espírito Santo of Portugal is being kept artificially alive thanks to about €5 billion ($6.7 billion) in state funds. Although stockholders and bondholders also have to contribute, the lion’s share of the cash is once again being taken from taxpayers. The financial lifeline is coming from an aid package that Portugal received during the financial crisis from the European Union, International Monetary Fund and European Central Bank.

Almost six years after U.S. investment bank Lehman Brothers went bust, not much seems to have changed in governments’ vulnerability to extortion by major banks. The problem of being “too big to fail” — that certain banks cannot be allowed to fail because such a collapse poses a systemic risk — remains unsolved.

Want to keep reading?

Subscribe now or log in to read our coverage of Europe’s leading economy.