11 Jul 2014
Portugal's Banco Espírito Santo woes send markets tumbling
FXStreet (Łódź) - On Thursday global markets fell on worries over the troubles of Portugal's second largest lender Banco Espírito Santo, which is now thought to be hovering on the brink of default. The Bank's shares have been declining since May, but the final blow came yesterday when it the parent company Espírito Santo International postponed payments to some of the investors holding its short-term debt securities.
Fears of contagion resulted in declines in all of the major European stock indexes, which have also affected Wall Street. The International Monetary Fund released a statement in which it stressed that even though Portugal's financial sector managed to endure the debt crisis "pockets of vulnerability remain."
Prime Minister Pedro Passos Coelho told reporters on Friday that investors shouldn't worry about the stability of the financial system while the Bank of Portugal tried to calm BES depositors saying that it has enough capital to accomodate impact from exposure to Espirito Santo group.
Jim Reid, Head of Global Fundamental Credit Strategy at Deutsche Bank, also suggests that the situation should be brought under control soon. In his opinion the very unusual ownership structure of the group leads to believe that "this will be a fairly contained event as the vast majority of European banks have totally different and simpler structures."
"Also when there's talk of financial irregularities (as there has been here for a few weeks) that's usually something that is idiosyncratic rather than systemic," the analyst points out adding however that the situation nevertheless "reminds us of the stresses that still are present in the global system and in particular in Europe and in parts of the financial sector."
Fears of contagion resulted in declines in all of the major European stock indexes, which have also affected Wall Street. The International Monetary Fund released a statement in which it stressed that even though Portugal's financial sector managed to endure the debt crisis "pockets of vulnerability remain."
Prime Minister Pedro Passos Coelho told reporters on Friday that investors shouldn't worry about the stability of the financial system while the Bank of Portugal tried to calm BES depositors saying that it has enough capital to accomodate impact from exposure to Espirito Santo group.
Jim Reid, Head of Global Fundamental Credit Strategy at Deutsche Bank, also suggests that the situation should be brought under control soon. In his opinion the very unusual ownership structure of the group leads to believe that "this will be a fairly contained event as the vast majority of European banks have totally different and simpler structures."
"Also when there's talk of financial irregularities (as there has been here for a few weeks) that's usually something that is idiosyncratic rather than systemic," the analyst points out adding however that the situation nevertheless "reminds us of the stresses that still are present in the global system and in particular in Europe and in parts of the financial sector."