The Fall of the House of Espírito Santo

The Espírito Santo family’s Portuguese banking dynasty was built over more than a century. It fell apart in a matter of months. In July three of Banco Espírito Santo’s parent companies sought protection from creditors. The family’s top executive, Ricardo Espírito Santo Silva Salgado , 70, stepped down as the chief executive officer on July 14. He was later detained for questioning and released on €3 million ($4 million) bail in a tax fraud and money-laundering probe—not connected to his role at the bank. He has denied wrongdoing. On Aug. 3 the lender founded by his great-grandfather was taken over in a €4.9 billion bailout.

The Bank of Portugal, the country’s central bank, has transferred most of Banco Espírito Santo’s assets and deposit-taking operations to a new company, Novo Banco, into which it will inject money from its resolution fund. The industry-financed fund will pay for the rescue with the help of a loan from the Treasury to be repaid by Novo Banco’s eventual sale. “I never imagined things could turn out so badly,” says José Capela, a retired airline pilot who lives in the coastal town of Cascais, also home to Salgado and many other Espírito Santo family members. “It’s very sad to see the Espírito Santo financial empire crumbling.”