Identifier
Created
Classification
Origin
09LISBON217
2009-04-17 15:28:00
CONFIDENTIAL//NOFORN
Embassy Lisbon
Cable title:
PORTUGAL BANKERS SEE PROGRESS BUT A DIFFICULT 2010
how-toVZCZCXRO2888 RR RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSR DE RUEHLI #0217/01 1071528 ZNY CCCCC ZZH R 171528Z APR 09 FM AMEMBASSY LISBON TO RUEHC/SECSTATE WASHDC 7575 INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE RUCPDOC/DEPT OF COMMERCE WASHDC RUEATRS/DEPT OF TREASURY WASHDC
C O N F I D E N T I A L SECTION 01 OF 02 LISBON 000217
SIPDIS
NOFORN
COMMERCE DEPT FOR ITA/MAC:DCALVERT
E.O. 12958: DECL: 04/15/2019
TAGS: ECON EFIN PGOV PO
SUBJECT: PORTUGAL BANKERS SEE PROGRESS BUT A DIFFICULT 2010
REF: A. 08 LISBON 2666
B. 08 LISBON 2707
Classified By: Gary B. Applegarth, Pol-Econ Officer, Reasons 1.4 (b)
and (d).
SUMMARY
-------
C O N F I D E N T I A L SECTION 01 OF 02 LISBON 000217
SIPDIS
NOFORN
COMMERCE DEPT FOR ITA/MAC:DCALVERT
E.O. 12958: DECL: 04/15/2019
TAGS: ECON EFIN PGOV PO
SUBJECT: PORTUGAL BANKERS SEE PROGRESS BUT A DIFFICULT 2010
REF: A. 08 LISBON 2666
B. 08 LISBON 2707
Classified By: Gary B. Applegarth, Pol-Econ Officer, Reasons 1.4 (b)
and (d).
SUMMARY
--------------
1. (U) On April 14 five leading Portuguese financiers told
the Ambassador the Portuguese economy is faring well through
the first year of the global financial crisis but rising
unemployment and higher interest rates are looming challenges
for 2010. The group called for a stronger hand by the
Central Bank and applauded the "more relevant" G-20 summit.
End summary.
PORTUGUESE FINANCIAL SECTOR OKAY, BUT FACES MORE CHALLENGES
-------------- --------------
2. (U) In an April 14 meeting, executives from five leading
Portuguese financial institutions shared their views on how
Portugal is weathering the current global financial crisis.
Attending the meeting were Fernando Ulrich of Banco BPI, Nuno
Amado of Santander Totta, Carlos Rodrigues of Banco de
Investimento Global (BiG),Nestor Paz-Galindo of JP Morgan
Chase, and Carlos Santos Ferreira of Millenium BCP.
3. (U) Paz-Galindo said Portuguese financial markets are
"doing okay" through 2009, bank earnings are improving, and
"everyone is trying to determine if we are experiencing a
bear rally or if we have really hit bottom" and are on the
way back up. Financial sector capital liquidity has
improved, but investment liquidity is still lacking.
Rodrigues added that GOP interventions in the financial
sector last fall were necessary due to poor management and
malfeasance at the target banks, but the sector is now stable.
4. (C/NF) Ulrich cautioned, however, that increasing
unemployment will put further stress on the Portuguese
economy next year. Amado concurred, worrying that in 2010
higher interest rates could create a heavy interest burden on
the economy. Santos Ferreira opined that increasing
unemployment and public stress over the economy could produce
historically strong results for the Left Bloc and Communists
in the upcoming elections, but the others projected the
ruling Socialists' relative fiscal conservatism before the
crisis would pay off through continued public support.
STRONG CENTRAL BANK, RATING AGENCY TRANSPARANCY NEEDED
-------------- --------------
5. (C/NF) The financiers all called for a stronger
regulatory hand by the Central Bank and decried the Bank's
slowness to take action on poorly performing banks. All of
the bankers said the Portuguese banking sector needs
consolidation but they are skeptical of the Central Bank's
will to achieve this. Santos Ferreira said additional
regulation is needed in areas "where none exists," such as
regarding hedge funds or financial derivatives.
6. (C/NF) Amado added that more transparency of the rating
agencies is needed, complaining that some U.S. and European
banks which ultimately failed had been rated higher prior to
their closure than his own bank, which continues to operate
and meet its obligations. The group joked about the need to
"rate the raters" but doubted efforts by French President
Sarkozy and German Chancellor Merkel to enact tighter
supervision of rating agencies will bear fruit.
G-20 MEETING A WELCOME DEVELOPMENT
--------------
7. (U) The group had a favorable impression of the recent
G-20 summit. They agreed that the summit was a positive show
of international cooperation and dialogue, even though it
produced little tangible outcome. Rodrigues applauded the
creation of the "more relevant" G-20, replacing the G-7 which
"unbelievably" excluded many of the world's largest economies.
COMMENT
--------------
8. (C/NF) The bankers were more upbeat than in similar
meetings last fall (reftel A, B),and their lighter
dispositions underscored their cautious optimism. We agree
with the bankers' belief that the Portuguese economy will
begin to trend up as the U.S. and larger European economies
recover, and barring additional scandal among the ruling
Socialists we doubt the crisis alone will result in dramatic
changes in the upcoming elections. End comment.
LISBON 00000217 002 OF 002
For more reporting from Embassy Lisbon and information about Portugal,
please see our Intelink site:
http://www.intelink.sgov.gov/wiki/portal:port ugal
STEPHENSON
SIPDIS
NOFORN
COMMERCE DEPT FOR ITA/MAC:DCALVERT
E.O. 12958: DECL: 04/15/2019
TAGS: ECON EFIN PGOV PO
SUBJECT: PORTUGAL BANKERS SEE PROGRESS BUT A DIFFICULT 2010
REF: A. 08 LISBON 2666
B. 08 LISBON 2707
Classified By: Gary B. Applegarth, Pol-Econ Officer, Reasons 1.4 (b)
and (d).
SUMMARY
--------------
1. (U) On April 14 five leading Portuguese financiers told
the Ambassador the Portuguese economy is faring well through
the first year of the global financial crisis but rising
unemployment and higher interest rates are looming challenges
for 2010. The group called for a stronger hand by the
Central Bank and applauded the "more relevant" G-20 summit.
End summary.
PORTUGUESE FINANCIAL SECTOR OKAY, BUT FACES MORE CHALLENGES
-------------- --------------
2. (U) In an April 14 meeting, executives from five leading
Portuguese financial institutions shared their views on how
Portugal is weathering the current global financial crisis.
Attending the meeting were Fernando Ulrich of Banco BPI, Nuno
Amado of Santander Totta, Carlos Rodrigues of Banco de
Investimento Global (BiG),Nestor Paz-Galindo of JP Morgan
Chase, and Carlos Santos Ferreira of Millenium BCP.
3. (U) Paz-Galindo said Portuguese financial markets are
"doing okay" through 2009, bank earnings are improving, and
"everyone is trying to determine if we are experiencing a
bear rally or if we have really hit bottom" and are on the
way back up. Financial sector capital liquidity has
improved, but investment liquidity is still lacking.
Rodrigues added that GOP interventions in the financial
sector last fall were necessary due to poor management and
malfeasance at the target banks, but the sector is now stable.
4. (C/NF) Ulrich cautioned, however, that increasing
unemployment will put further stress on the Portuguese
economy next year. Amado concurred, worrying that in 2010
higher interest rates could create a heavy interest burden on
the economy. Santos Ferreira opined that increasing
unemployment and public stress over the economy could produce
historically strong results for the Left Bloc and Communists
in the upcoming elections, but the others projected the
ruling Socialists' relative fiscal conservatism before the
crisis would pay off through continued public support.
STRONG CENTRAL BANK, RATING AGENCY TRANSPARANCY NEEDED
-------------- --------------
5. (C/NF) The financiers all called for a stronger
regulatory hand by the Central Bank and decried the Bank's
slowness to take action on poorly performing banks. All of
the bankers said the Portuguese banking sector needs
consolidation but they are skeptical of the Central Bank's
will to achieve this. Santos Ferreira said additional
regulation is needed in areas "where none exists," such as
regarding hedge funds or financial derivatives.
6. (C/NF) Amado added that more transparency of the rating
agencies is needed, complaining that some U.S. and European
banks which ultimately failed had been rated higher prior to
their closure than his own bank, which continues to operate
and meet its obligations. The group joked about the need to
"rate the raters" but doubted efforts by French President
Sarkozy and German Chancellor Merkel to enact tighter
supervision of rating agencies will bear fruit.
G-20 MEETING A WELCOME DEVELOPMENT
--------------
7. (U) The group had a favorable impression of the recent
G-20 summit. They agreed that the summit was a positive show
of international cooperation and dialogue, even though it
produced little tangible outcome. Rodrigues applauded the
creation of the "more relevant" G-20, replacing the G-7 which
"unbelievably" excluded many of the world's largest economies.
COMMENT
--------------
8. (C/NF) The bankers were more upbeat than in similar
meetings last fall (reftel A, B),and their lighter
dispositions underscored their cautious optimism. We agree
with the bankers' belief that the Portuguese economy will
begin to trend up as the U.S. and larger European economies
recover, and barring additional scandal among the ruling
Socialists we doubt the crisis alone will result in dramatic
changes in the upcoming elections. End comment.
LISBON 00000217 002 OF 002
For more reporting from Embassy Lisbon and information about Portugal,
please see our Intelink site:
http://www.intelink.sgov.gov/wiki/portal:port ugal
STEPHENSON