The Espirito Santo saga has caused a flurry of corporate bankruptcies and required a public bailout of Portugal’s second-largest lender, Banco Espirito Santo. The episode also has ensared a growing list of outside financial institutions that played a variety of roles working with the Espirito Santo group in recent years. Here is the latest tally.
The audit firm is the latest addition to the list. KPMG’s Lisbon office audited Banco Espirito Santo and dozens of related entities. And its office in the offshore tax haven of Jersey audited three special-purpose vehicles that primarily trafficked in Espirito Santo debt. Experts say the broad scope of KPMG’s audit work should have put it in a position to detect problems earlier. KPMG defends the quality of its work, which it says adhered to all rules and professional standards.
2 Credit Suisse
The Swiss bank was the “arranger” for the three aforementioned Jersey vehicles, called Poupanca Plus Investments, Top Renda and EuroAforro Investments. Those entities bought billions of euros of Espirito Santo debt, issued securities that were sold to Banco Espirito Santo customers, and used the proceeds to buy more Espirito Santo debt. Portuguese regulators are investigating their role in the scandal. Credit Suisse acknowledges its role working with the vehicles, but says it had “no visibility” about whom the securities were sold to.
The Swiss financial institution was originally created to help manage the finances of the Espirito Santo family. It’s no longer owned by Espirito Santo, but until recently much of its business came from the group. Portuguese regulators believe Eurofin played a central role in the Espirito Santo scandal, helping run vehicles that moved money throughout the empire. Eurofin denies playing a central role in the scandal, but says it is still “performing its own analysis of what happened.”
4 Societe Generale
The French bank’s Caribbean branches served as intermediary for transactions between Eurofin and Espirito Santo. In 2012, Societe Generale’s compliance department prompted the bank to stop doing business with the entities, according to a person familiar with the matter.
The Japanese bank earlier this year loaned €100 million to Espirito Santo Financial Group, with Banco Espirito Santo stock serving as collateral. In July, with the bank’s shares plunging, Nomura issued a margin call, according to a person familiar with the matter. That prompted ESFG to sell €96 million of shares, or 5% of the bank’s outstanding total, to repay the loan, this person said.
5 Reasons Espirito Santo Saga Has Snared Other Institutions, Wall Street Journal