December 19, 2016 / 6:11 PM / 9 months ago

Banco Espirito Santo retail customers to get 60 pct of money back

LISBON, Dec 19 (Reuters) - Around 4,000 retail customers of Banco Espirito Santo who lost their savings when the banking group collapsed in 2014 should get around 60 percent of their money back under a plan presented on Monday by the Portuguese government.

The retail investors have protested and taken legal action to try to get compensation for their losses since the government stepped in to rescue Banco Espirito Santo. This included an injection of 4.9 billion euros ($5.12 billion) into the healthy part of the bank now known as Novo Banco.

The government’s plan should remove one of the litigation risks that has complicated efforts to sell Novo Banco.

Prime Minister Antonio Costa said the proposed solution would not weigh on the taxpayer.

“This is a balanced commitment that seeks to minimize existing losses ... those who have to pay will not be exempt from paying, those who are owed will see their money sooner and it is guaranteed that taxpayers will not have to contribute to resolve this situation,” Costa said.

He also said the plan should reinforce confidence in the Portuguese financial system, which is still reeling from the rescue of BES in 2014 and smaller bank Banif last year.

Under the plan, retail customers will receive 286 million euros over the next three years out of the 485 million euros they invested in the commercial paper of the now bankrupt holding companies linked to Banco Espirito Santo’s founding family. The money for the compensation will come from Portugal’s bank resolution fund.

Retail clients who invested up to 500,000 euros will recover up to 75 percent of their investments and those who put more will get up to 50 percent.

They have to sign up to the plan by giving up their claims already filed with various courts. A new entity will be set up to handle all claims and pay out compensation.

The BES victims’ association has already welcomed the plan.

“Putting an end to this process is extraordinary, it’s a blessing,” Ricardo Angelo, head of the association, said.

Novo Banco still faces other litigation risks, including legal action brought by asset managers against Portugal’s central bank over heavy losses on nearly 2 billion euros of bonds. ($1 = 0.9575 euros) (Reporting By Sergio Goncalves and Andrei Khalip. Editing by Jane Merriman)

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