A Perspective on European Banking
Yesterday, Patricia Kowsmann published the linked article on the Portuguese banks. I wish it was as good as Patricia described.The facts are:
With one exception, all of the Portuguese banks including Caixa Geral, the government owned bank, are technically bankrupt and insolvent. They have not yet written down most of their nonperforming loans nor the owned properties acquired through default.
Caixa, as a result of cronyism and poor management sits on debased assets, many of which came out of the Ricardo Salgado fraud and embezzlement of the Espirito Santo Bank and his cozy relationship with the government and the Caixa. We estimate that to be made whole, after realistic write-downs and accounting, the government bank, Caixa, will require a capital injection of between 5 and 10 billion Euro, not the 2 billion Euro the Wall Street Journal suggests.
Novo Banco, the good bank exiting from Banco Espirito Santo, the primary victim of the Salgado embezzlement, has already received a 4.9 billion Euro injection and will certainly need another 3 billion of capital to survive. It's management has been pulling hard to survive the bank's crisis but Salgado hit it hard with fraudulent and croniest transactions. Each day there are new discoveries of worthless assets. The Portuguese government will not only loose the 3.9 billion Euro it has put in to the bank but will be required to guarantee a buyer against substantial additional losses (in the billions) if the bank is to be sold.
The story goes on—most of it in Patricia's article, which you can find by clicking here.
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