Banco Espírito Santo's ruinous management cost Portugal €4.9B

Banco Espírito Santo (BES) was one of Portugal's largest banks, controlled by the Espírito Santo family for over a century. In the first half of 2014, the bank recorded a loss equivalent to $4.8 billion (approximately €3.6 billion), including a record second-quarter loss of €3.49 billion. Its shares fell 89%.

A Deloitte audit later concluded that the administration led by CEO Ricardo Salgado had engaged in 'wilful acts of ruinous management' and had disobeyed the Bank of Portugal 21 times between December 2013 and July 2014. The bank's losses were driven by toxic exposure to the Espírito Santo family's web of companies, which had borrowed heavily from the bank and could not repay.

On 3 August 2014, the Bank of Portugal split BES into two: a 'good bank' called Novo Banco that held the healthy assets, and a 'bad bank' that held the toxic assets. The Portuguese Resolution Fund injected €4.9 billion to recapitalize Novo Banco. The bad bank entered liquidation in July 2016. Salgado was held in 2014 on suspicion of tax evasion and money laundering, and later convicted.