Banco Espírito Santo

The Banco Espírito Santo (BES) case covers issues related to bank strategy, safety and soundness, the role of conglomerates, and problems related to family control. The setting is Europe, following the financial crisis of 2007-09, and its efforts to create a single banking market. It illustrates the lack of transparency inherent in conglomerates that have banks 'embedded' in them, the additional opacity associated with family control, the problems of tracking cross-border risk exposures even under market integration funds in the EU and the Eurozone, and the associated systemic risks.

The teaching objectives centre around four questions at the end of the case: (1) Describe the core strategy of Banco Espírito Santo and its competitive advantage in terms of its range of financial services, client coverage and geographic presence from the perspective of a public investor. (2) Describe Banco Espírito Santo’s ownership and governance structure in terms of its advantages and disadvantages, including the associated risk and its role in the ultimate outcome. (3) Decide whether Banco Espírito Santo was a "systemically important" institution in the Portuguese and European contexts. If so, what explains the failure of the regulators to protect the public interest? (4) Evaluate the effectiveness of the hybrid resolution plan imposed on Banco Espírito Santo.