Thiruvananthapuram

28°C

Haze

Enter word or phrase

Look for articles in

Last Updated Saturday November 16 2019 12:56 AM IST
Other Stories in Bussiness Boom

Crony capitalism and the jailbird bankers

P. Kishore
Special Correspondent @ Malayala Manorama
Author Details
Text Size
Your form is submitted successfully.

Recipient's Mail:*

( For more than one recipient, type addresses seperated by comma )

Your Name:*

Your E-mail ID:*

Your Comment:

Enter the letters from image :

Crony capitalism and the jailbird bankers A man walks past the Banco Espirito Santo headquarters in Lisbon. AFP/File photo

Holy Spirit Bank! Banco Espirito Santo (BES) means exactly that in Portugese. Till last week, BES was the second largest bank in Portugal. But the bank that's almost 100 years old had to be rescued by the Central Bank of Portugal by pumping in $ 6.6 billion. It showed a greater malaise prevalent in many European countries — crony capitalism and its off-shoot, banking cliques.

The chairman of BES, Ricardo Espirito Santo Silva Salgado, was arrested and released on bail after he coughed up 3 million pounds. What was the crime committed by the Holy Bank? Giving away big ticket loans to relatives, industrial concerns belonging to the same family, money laundering, insider trading... just about any financial fraud on the book. The same story of crony capitalism, banking fraud and chairmen becoming jailbirds exists in India too. The best examples are Sahara and Syndicate Bank.

The three European countries, namely Greece, Ireland and Portugal facing grave financial crisis had banking cliques that was the cause of their decay. Millionaires or rather billionaires move in from around the world with their loot and the bank cliques have a merry ride with the money. Espirito Santo was founded in late 19th century with lottery business. In 1920 it became a bank.

The big break came during the World War II when Portugal was neutral and hence peaceful. Rich men like Rothshield and Rockfeller and members of Royalty moved in with their wealth. BES and the controlling family moved up the social ladder and enriched themselves.

Banco Espirito Santo now became an industrial conglomerate with interests in hospitals, estates, hotels etc. But when the military Junta in Lisbon was overthrown in the 1974 revolution, BES got nationalised. The family members had to flee the country and seek greener pastures in other countries as far away as Brazil. Interestingly, Brazil has even a state named hold your breath- Espirito Santo.

Again the political change in Portugal saw the fortune changes of the banking family. With generous help from the french bank, Credit Agricol, the family got BES back. From then on, BES knew no bounds. It came to be called the Dono Disto Todo of Portugal — meaning owner of everything.

But all that halo was worn off once the Central Bank moved in and exposed the wrong doings of BES. The erring bank was split in to two-Novo Banco which holds good assets, branches and staff, and the old one inherited the bad or caustic assets. Pumping in taxpayers money was inevitable as failure to do so would have led to loss of faith in the banking system and its collapse.

Now India has its own Dono Disto Todo in Sahara group. Sahara Parivar is said to own 36,631 acres of land in different states. Through running a non banking financial institution, Sahara claims to have amassed Rs 24,029 crore ($4 billion.) from small-time investors. India's market regulator SEBI got its act together and filed cases against Sahara. Supreme court ordered the ill-gotten money be given back to depositors.

But where are these depositors? SEBI also found that investor's names were bogus. The real depositors are the corrupt politicians and businessmen and the money is part of the multi-billion black economy prevailing in India. Subrata Roy, the chairman of Sahara, spends time in Tihar Jail in New Delhi.

The Supreme court set a target of Rs 10,000 crore (roughly $1.8 billion) to be deposited for the bail of Subrata Roy. To amass this amount, Roy is selling his prized hotels in London and New York. To facilitate negotiations of the sale, Roy has been given a conference room in the jail premises with video conference facility.

Your Rating:
Your form is submitted successfully.

Recipient's Mail:*

( For more than one recipient, type addresses seperated by comma )

Your Name:*

Your E-mail ID:*

Your Comment:

Enter the letters from image :

Disclaimer

The comments posted here/below/in the given space are not on behalf of Manorama. The person posting the comment will be in sole ownership of its responsibility. According to the central government's IT rules, obscene or offensive statement made against a person, religion, community or nation is a punishable offense, and legal action would be taken against people who indulge in such activities.

Email ID:

User Name:

User Name:

News Letter News Alert
News Letter News Alert