In the last quarter of 2014, the National Council of Financial Supervisors (CNSF) alerted the Government to the situation of Montepio Geral group and called for urgent steps to enable their proper supervision. It, however, seven months and the executive continues without taking action, which is creating a context of great concern about the future of an institution with 175 years, 650 000 members and owns a bank with thousands of customers.
In a joint letter sent in October 2014 to the Minister of Finance, Maria Luís Albuquerque, leaders of the Bank of Portugal (BoP), Carlos Costa, the Portuguese Securities Market Commission (CMVM), Carlos Tavares, and Authority Supervision of Insurance and Pension Funds (ASSFP), José Almaça, expressed concern over the current framework for the management and governance in force on the Montepio Geral Group (Bank and Mutual Benefit Association), which they consider not being properly monitored.
regulation Source PUBLIC explained to the letter resulted in a warning to the government and the initiative was approved during a meeting of the CNSF, led by Carlos Costa, held in September last year, and where it was made a detailed analysis of the Montepio situation.
At the heart of Costa concerns, Tavares and Almaça is the fact that the Mutual Benefit Association (AM), owner of Caixa Económica Montepio be under the Ministry Solidarity, Employment and Social Security, but does not answer to any financial supervisor, although their skills to be attracting savings among individuals and make the necessary applications.
In Portugal, any entity operating with these duties are mandatorily regulated by one of three institutions:. CMVM, bop or ASSFP
Meanwhile, Montepio (Savings Bank) bank, belonging to the financial sector, is under the purview of the Ministry of Finance and is supervised by the bop, which does not act in the Mutual Benefit Association. Hence the joint request of the Maria Luís Albuquerque, to start a process of legislative change. The terms of the “warning letter” are clear: Carlos Costa, Carlos Tavares and Jose Almaça requesting legislation that gives powers to the ASSFP to spend inspect the Mutual Benefit Association.
Potential conflict of interest
The Montepio Geral Group is based on two attached entities (bank and mutual association, which is the parent company), whose administrations share the same president (position currently occupied by Tomás Correia), and not one of them supervised financially, it opened the way for a potential conflict of interest.
The situation also generates a increased risk to the 650,000 members of AM, which in 2013 posted a loss of 336 million. The group’s head (AM) delegates and focuses the management of its assets in Montepio bank, so the main risk is that there is an infection of mutual universe for the financial area. The commercial network of Montepio bank has promoted with the associated mutual subscription of bonds and the financial institution. At the end of 2013 to help the Montepio bank to strengthen capital, proceeded to the issuance of units (UP) of Caixa Económica Montepio Geral Participation Fund, through the placement of EUR 200 million, acquired by the AM and particular. Between 2013 and 2014, Montepio bank took losses of 485.5 million and was forced to set aside provisions of 643 million.
While the Government still does not legislate, the inspection campaign of bop to Montepio bank is not effective. BES dossier was supervision failures because the Government (through the Minister of Finance), the bop, the CMVM and the ASSFP not articulated to prevent the collapse of GES / BES (having the bank ended up being contaminated by the non-financial area) but in the Montepio Group the three regulators can not articulate: the bop claims that its perimeter of action only covers the Montepio bank; CMVM says it is confined to certain market operations; the regulator of the insurance sector and pension funds disclaims itself from any intervention in the mutual area. Only the Government has the power to stop “any slippage.”
Unlike Montepio bank, whose clients with deposits up to 100,000 euros are covered by rain-hat of the Deposit Fund (in case of insolvency the values are returned), the 650,000 members of AM have no protection.
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