LISBON: Leading Portuguese bank Banco Espirito Santo (BES) was in turmoil on Friday, with the departure of its chief executive after a suspension of trading in its shares.
The head of the bank, Ricardo Salgado, who has been in charge for 23 years, will leave on July 31 when shareholders will elect his successor, the bank announced.
The shake-up at the bank, the biggest in Portugal by capitalisation, comes against a background of suspicion that the bank's main holding company covered up a hole in the accounts.
After the announcement, the stock market regulator ended the suspension of shares in the bank.
The shares, which had already fallen heavily on the allegations of fraudulent accounting, shed another 4.49 percent to 0.87 euros. The overall market in Lisbon was down 1.0 percent.
A battle for the top job within the Espirito Santo family, which held a controlling interest until a capital increase last week, had also soured the climate.
Portuguese banks have been hard hit by the financial crisis and by the eurozone debt crisis when Portugal was bailed out.
The financial holding company Espirito Santo Financial Group (ESFG), with 25.1 percent of the shares held on behalf of various factions in the family, has proposed a Salgado ally, Amilcar Morais Pires, as the next chief executive.
ESFG has also chosen a member of parliament for the governing Social Democratic Party, Paulo Mota Pinto, to be president of the supervisory board.
Salgado, aged 69, and other members of the family are now expected to be confined to sitting on a "strategic council", expected to be set up by the shareholders' meeting.
Press reports said that the central bank wanted to restrict the family to sitting on a consultative body.
In a turbulent day, the regulator had told the company to clarify the fate of Salgado after press reports said that he was about to go.
Family sidelined:
The Espirito Santos family lost their controlling stake when the bank raised 1.04 billion euros ($1.4 billion) of capital last week.
The bank is the target of allegations that its main holding company, Espirito Santo International (ESI), which owns 49.0 percent of ESFG, had concealed losses.
Press reports allege that ESI had not revealed a loss of 180 million euros in 2008 when the financial crisis preceding the debt crisis began.
This hole in the accounts then grew to 1.3 billion euros in 2013, it is alleged. ESI is being investigated by judicial authorities in Luxembourg, where it is based.
The Portuguese central bank, which has ordered an audit of Espirito Santo International, is believed to have taken discreet action to prevent problems in the company damaging the country's banking system during the upheaval of the financial crisis.
Salgado has acknowledged that the group made mistakes at the level of management in the holding company.
The former accountant for the holding company, Francisco Machado da Cruz, has accused Salgado of being aware of the attempt to cover up the loss by means of revaluing assets.
For the first quarter of this year, the bank reported a net loss of 89.2 million euros, worse than a loss of 62.0 million a year earlier, because of an increase in provisions for bad debts.
For the whole of last year it made a net loss of 517.6 million euros, down from a profit of 96.1 million euros in 2012.
BES, which is active in Portuguese-speaking Africa, Brazil and in Spain, says it intends to use the new capital to strengthen its position as the Portuguese economy recovers.
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