The former and current CEO chairman Fernando Ulrich’s Fernando Ulrich said this Tuesday that he was “unfortunately” right regarding the capital needs of Novo Banco subsequent to the resolution, considering the institution’s recovery a “success story”.
In his initial intervention in the inquiry committee of Novo Banco, Fernando Ultrich recalled an interview given to Expresso in September 2014, in which he said he hoped that Banco de Portugal had “done the math well” and did not believe that “in two or three years” the bank could “be better”.
“Unfortunately I was right in these two statements”, he told the deputies, in the initial intervention he made in the Eventual Committee of Parliamentary Inquiry into the losses registered by Novo Banco and imputed to the Resolution Fund.
For the current chairman of BPI’s Board of Directors, a “relevant question” is whether the losses in Novo Banco “were generated until August 2014” or later.
“I don’t have elements to answer precisely, but my impression, my perception, my feeling, based on my experience and what I have been observing, is that a very significant part of this 16.4 billion euros of capital used to cover losses, it was due to decisions taken before August 2014,” said the economist.
At the end of his initial intervention, of around 25 minutes, the former BPI CEO said that “the tragedy caused by the bank’s management was followed, from August 2014, onwards by a success story”.
However, Fernando Ulrich considered that “the bank’s capitalization effort was poorly and unfairly distributed”, since “the participation of creditors should have been much greater and that of the Resolution Fund much smaller”.
During his speech, Fernando Ulrich also considered that the transfer of obligations made at the end of 2015 should have been greater, something that “defended the public interest even more than what was done”.
“I admit that there have been strong causes for it not to have been the way I would have liked,” he concluded.
Fernando Ulrich also said that the “major shareholders” of BES “were responsible because they did not adequately control or supervise the performance of the management bodies”.
The manager also said, regarding the needs of Novo Banco, that “seen now, June 2021”, it was “better if the problem was resolved gradually and in phases”.
The manager also considered that the current banking regulation and supervision “in Portugal and in the euro zone are very strong, competent, independent and very intrusive”.
“If there were things that didn’t go well in the past, they’re out of date. It’s a solved problem,” he said.
BES’s relationship with BESA generated a “great question”
Fernando Ulrich also said that he had a “great question” as to why BES had almost three billion euros in credit at BES Angola.
“I raised a big question why there was a bank based in Portugal on our side that had almost three billion euros in credit granted to the bank in Angola”, he said, comparing the relationship of BES and BESA with BPI and BFA, also Angolan.
“I could never understand what it was for, what did they do it for, how did they evaluate it”, responded to deputy João Paulo Correia (PS).
Fernando Ulrich also stated that “probably”, if one looked “at other Portuguese banks that had stakes or controlled banks in Angola”, the operations “were more similar to those of BPI than those of Banco Espírito Santo”.
“BPI did not need to lend money to BFA”, he referred, even pointing out that “at that time BFA was the one that had credit on BPI, as a significant part of its reserves were in dollars”, having “permanently hundreds of million dollars deposited” in the Portuguese bank.
According to Fernando Ulrich, “looking at the joint balance of BPI-BFA and BES-BESA were two such different realities that, at least, they aroused a lot of questioning and curiosity”.
The credit of the former BES to BES Angola (BESA) is one of the most controversial issues regarding the losses assumed by Novo Banco.
BES’ exposure to BESA between 2008 and 2014 went from 1,700 to 3,300 million euros, corresponding to 47% of BES’ own funds at the date of the Portuguese bank’s resolution, in August 2014.
BES’ exposure to BESA was covered, until shortly after BES’ resolution, by a sovereign guarantee of Angola, signed by the then President of the Republic, José Eduardo dos Santos, and whose validity was reiterated by the Finance Minister, Armando Manuel, it was later revoked.
BPI wanted to create “another bad bank”
Fernando Ulrich revealed that, when there was interest in buying Novo Banco for the second time, he proposed the creation of “another bad bank”, considering the sale to Lone Star “a good operation”.
Questioned by PS deputy João Paulo Correia about the fact that BPI was interested in buying the bank both times, either in the failed sale in 2015 or in the one that took place in 2017. “In the second sale, which later ended with the operation with Lone Star, in the working document that we delivered to the Resolution Fund, the entity that was selling, then yes, we made considerations like that about the doubts we had, about the quality of the bank’s assets and what we didn’t like to buy , let’s say,” he assumed.
According to Fernando Ulrich, BPI did not present the modality of “contingent capital” and what it intended was that, “if there was a set of assets in relation to which” the bank either did not like or had great difficulty in evaluating, what was proposed the team that handled the sale was to have those assets withdrawn from the bank.
“Create another bad bank because the first bad bank did not absorb all of what was the set of bad assets that existed in BES and only the good bank remains. So let’s only discuss the good bank because, if we only have to discuss the good bank, it will be easier for us to understand each other about the values because the margin of difference of opinion will be much smaller”, he reported.
However, the former executive chairman of BPI assumed that “they were amounts greater than the protection that Lone Star asked for” and, in order to remove assets from the bank’s balance sheet, “it was necessary to compensate this with capital”.
“And, therefore, the effort that would be asked was greater that’s why I say: I think the operation with Lone Star was a good operation at that time and under those circumstances,” he said.
Fernando Ulrich also said that BPI entered the first attempt to sell Novo Banco in 2015, “but was excluded when moving from the first to the second phase”.
“There was a first phase in which we were around 14 entities that raised the file and then we had to fulfill certain conditions to move on to the next phase and we didn’t pass. We studied the matter, but we fell far short,” he recalled.