A Portuguese consumer association has launched legal action to get compensation for small shareholders of the collapsed Banco Espirito Santo as the New Zealand Superannuation Fund lines up its own proceedings to try recover a $200 million loan made to the bank.
DECO, a Portuguese association, says it has filed an administrative case against Portugal's central bank, its government and its stock market regulator on behalf of BES' smaller former shareholders.
The aim of the action, according to a translated statement from DECO's website, is to get compensation for the financial institution's small shareholders who suffered losses.
DECO says it has received 2753 complaints since BES collapsed in August, when the Bank of Portugal launched a €4.9 billion rescue plan, and divided the financial institution in a "good bank" and a "bad bank" with its toxic assets and liabilities remaining with the later.
At the time of BES' bail out, it was revealed that while the bank's customers and senior bondholders will be protected, losses would be borne by the bank's shareholders and subordinated creditors.
The breakup of the bank came only weeks after New Zealand's Superannuation Fund made US$150 million contribution to BES via a Goldman Sachs-organised loan.
Goldman Sachs, with the Super Fund, is also suing the Central Bank of Portugal over its loans being excluded from a bailout of BES.
In a retrospective rule-change, Portugal's insolvency laws had been amended days before the breakup to put related-party loans at the back of any payment queue when banks fail. The debts of any creditor with shareholdings of 2 per cent or larger in a lender would be stranded in a toxic non-surviving "bad bank".
Last December, the Bank of Portugal ruled Goldman Sachs' shareholdings - they claimed the investment bank's holdings peaked at 2.27 per cent in June - met this limit.
• $200m lost by Super Fund as part of a loan to Portugal's Banco Espirito Santo (BES).
• Goldman Sachs-arranged vehicle Oak Finance raised US$784 million to make the loan.
• Less than two weeks after the cash was handed over, the bank's president resigned.
• BES posted €3.6 billion first-half loss and creditors and depositors began withdrawing billions.
• Bank of Portugal stepped in to save and break up the country's biggest lender by triaging creditors.
NZ Super Fund
• Set up with public money in 2001 to meet current and baby boomers' retirement costs.
• Currently holds $27.5 billion in assets.
• Between 2003 and 2009, the Government contributed $14.88 billion to the fund.
• Contributions are scheduled to resume from 2019/20 and from around 2029/30, the Government will begin to withdraw money from the Fund to help pay for New Zealand Superannuation.
• It has delivered a rate of return of 9.95 per cent per annum since 2003.
• Including a write-down of the $200 million lost, the super fund returned 16.71 per cent over the last 12 months.
The $200 million represents 0.7 per cent of the total super fund.Rea