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Deloitte’s audit of the management acts of BES / Novo Banco between 2000 and 2018 reveals that since its constitution, on August 4, 2014, the movements to increase the assets of Novo Banco total approximately 11 billion euros until December 31 2018, which includes the initial capital endowment of € 4.9 billion by the Resolution Fund.
According to the Deloitte audit published on Tuesday, September 8 on the Parliament’s website, amputated from the identification of debtors, the difference between the assets and liabilities transferred from BES to Novo Banco, in the terms defined in the resolution measure applied. from Banco de Portugal to BES and the conclusions of the evaluation carried out by the independent entity designated by Banco de Portugal, for an amount of 677 million euros. Of this last amount, the report explains, 250 million euros in original reserves, 194 million euros in other reserves and 134 million euros in minority reserves.
Deloitte points out that the effect of the decisions of the Banco de Portugal’s board of directors of December 22, 2014 and February 11, 2015, including in particular the transfer of the responsibility contracted by BES to Oak Finance Luxembourg with an impact of 548 million euros and other effects with a negative impact of 26 million euros.
“These resolutions were reflected in the original reserve by restatement of the opening balances on August 4, 2014,” says the audit.
The effect of the deliberations of the Board of Directors of the Bank of Portugal on December 29, 2015, with an impact of 1,948 million euros. These decisions included the retransmission to BES of a set of unsubordinated debt instruments, with a positive impact of 1,923 million euros on the original reserve.
The capital increase movements also include capital increases for the amount of 1,000 million euros carried out after the sale to Lone Star in 2017 and payments from the Resolution Fund of the Contingent Capital Mechanism (CCA), which absorbed the Toxic Assets of the heir bank of BES, for an amount of 792 million euros in 2017 and 1,149 million euros in 2018.
The audit highlights that “a significant part of the capital stock was consumed” by the accumulated losses recorded by Novo Banco until December 31, 2018, which amounted to approximately 5,950 million euros (considering the updates made during the period). And also for losses of 476 million euros related to the valuation of defined benefit plans for post-employment liabilities of Novo Banco with its employees, as well as the negative impact of 346 million euros derived from the adoption of IFRS 9 in 2018 ., mostly originated at the level of credit impairment.
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