Viewing cable 08LISBON2694
Title: PORTUGAL BANK NATIONALIZATION RATIFIED

IdentifierCreatedReleasedClassificationOrigin
08LISBON26942008-11-07 11:06:00 2011-08-30 01:44:00 CONFIDENTIAL Embassy Lisbon
VZCZCXRO5554
RR RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHLI #2694 3121106
ZNY CCCCC ZZH
R 071106Z NOV 08
FM AMEMBASSY LISBON
TO RUEHC/SECSTATE WASHDC 7139
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
C O N F I D E N T I A L LISBON 002694 
 
SIPDIS 
 
E.O. 12958: DECL: 11/05/2009 
TAGS: ECON EFIN PGOV PO
SUBJECT: PORTUGAL BANK NATIONALIZATION RATIFIED 
 
Classified By: Gary B. Applegarth, Pol-Econ Officer, Embassy Lisbon 
Reasons 1.4 (b) and (d). 
 
¶1.  (U) The Portuguese parliament ratified the 
nationalization of Banco Portugues de Negocios (BPN) 
announced by Finance Minister Teixeira dos Santos on November 
¶2.  The takeover, the first bank nationalization in Portugal 
since 1975, was prompted after days of negotiation failed to 
produce an acceptable plan ensuring BPN's solvency. 
Beginning November 3 the central bank is administering BPN 
operations, and management will transfer to state-owned Caixa 
Geral de Depositos at a later date.  BPN losses from 
declining investment values are currently estimated at 700 
million euros. 
 
¶2.  (U) Minister Teixeira dos Santos continued to emphasize 
the relative soundness of Portugal's financial system, and 
blamed BPN's troubles on mismanagement and possible 
malfeasance rather than the current economic crisis.  Justice 
officials are investigating allegations of fraud, money 
laundering, and other illegal activities at BPN. 
 
¶3.  (U) Separately, parliament approved the 4 billion euro 
package previously proposed by PM Socrates to help Portuguese 
banks strengthen their capitalization ratios.  Teixeira dos 
Santos said the stronger capital ratios will put Portuguese 
banks on a similar footing as other European banks.  Although 
profitability in the financial sector is down, Portuguese 
banks' conservative lending practices have minimized the 
negative impacts of asset devaluation experienced by many 
other international banks. 
 
¶4.  (C) Comment:  GOP and Central Bank contacts have been 
close-mouthed about the nationalization, but local business 
contacts generally agree that BPN's troubles stem from a long 
period of mismanagement and do not signal deeper distress for 
the broader Portuguese financial sector.  End comment. 
STEPHENSON