The Court of Appeal has upheld the validity of Banco de Portugal’s exercise of its resolution powers, overturning last year’s decision of the High Court -

The Facts -

Readers familiar with this case will recall that a matter of weeks after a group of investors provided over US$ 784m emergency liquidity (the Oak Loan) to Banco Espírito Santo (BES), it collapsed. Banco de Portugal formed Novo Banco as the good bank to which to transfer BES’s ‘good’ assets and liabilities, leaving the ‘bad’ assets and liabilities behind in BES as the bad bank. As part of this process, Banco de Portugal decided to transfer the Oak Loan to Novo Banco, though it caveated this decision as being ‘preliminary’. That was in August 2014. Come December that year, a further decision by Banco de Portugal reversed the decision, stating that, on further analysis, the Oak Loan ‘was not transferred to Novo Banco’ and that this was effective as from the August decision.