A new Portuguese bank appeared Monday, born from the ruins of a collapsed business empire, and declared on its website that it was now, quote, "stronger and safer."
Investors rattled by the euro-zone's latest financial drama will, however, need more reassurances.
Portugal's biggest banking scandal, which compelled authorities Sunday to put up 4.9 billion euros ($7.2 billion) to prevent the collapse of ailing Banco Espirito Santo, raised questions about how regulators were apparently hoodwinked. It will also focus minds on the European Union's year-long health check on the banking sector, the results for which are due in October.
The debt crisis that in recent years battered countries sharing the euro currency, forcing countries such as Greece, Ireland and Portugal to request bailouts, has ebbed in recent months. Investors remain wary, though. They fear more nasty surprises could be around the corner, and the scandal surrounding Banco Espirito Santo's huge unreported debts is fueling those concerns.
Barclays analysts predicted investors will "remain guarded about risks which could stem from latent problems in the (Portuguese) financial system." Lisbon's difficulties demonstrated "the major surgery that Europe still has to undergo with respect to its economic and banking problems," said a note from CMC Markets U.K.
The European Central Bank, the euro-zone's main regulator, is now examining the books of more than 100 of the bloc's top banks. The goal is to weed out the lame ones, helping ensure financial markets have faith in the banking system. It's the opinion of many that the Banco Espirito Santo case could undermine that effort.
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