Portugal’s central bank has stepped in to shore up Banco Espirito Santo using the country’s remaining EU bailout funds after the bank suffered a series of financial troubles.
Banco Spirito Santo first got itself into difficulty when suspicions emerged that its parent company, Espirito Santo International, had allegedly covered up a hole in the accounts totalling €1.3bn (£1bn).
The country’s largest bank has since reported a record loss of €3.6bn (£2.8bn) over the first half of 2014.
Portugal’s central bank governor Carlos Costa unveiled plans on Sunday evening to split Banco Espirito Santo into two with a “good bank”, to be called Novo Banco, to house its healthy assets and a “bad bank” for its riskier assets.
Novo Banco will receive €4.9bn (£3.9bn) worth of funds from Portugal’s EU bailout fund. It will be run by the EU’s ‘resolution fund’ until the bank can be sold off.
The BBC also reports that shareholders in the bank will face losing nearly all of their investment as part of plans to delist the bank from the stock market as of today.
Shares in Banco Espirito Santo have dropped by almost 90 per cent since news of its financial troubles first emerged at the start of June.
Depositors at the bank are expected to be fully protected as part of the central bank’s intervention.