Banco Espírito Santo: Asset and Liability Management during the Financial Crisis

This is a case about the risk management of an European (Portuguese) bank at the beginning of Europe’s sovereign-debt crisis. A bank highly dependent on the wholesale funding market has to make crucial decisions about the mix of its assets and liabilities, funding and investmnent strategies and financial risk management in general.
Managing asset and liability mismatches is of crucial importance for financial institutions, which in the case of Banco Espírito Santo (BES) was exacerbated by its business strategy. That task is even more important and far more challenging since mid-2007 as the financial crisis constrained bank’s capabilities for risk management, capital management, and funding management, especially during 2010 due to the Portuguese sovereign debt crisis.
The “Banco Espírito Santo: Asset and Liability Management during the Financial Crisis” identifies the key variables in Asset and Liability Management and applies them to BES in a practical manner. The development of BES’s balance sheet structure, financial market conditions, and the European Central Bank measures are presented and examined in light of the key ALM topics described in the case, providing an aid to better understand the process of Asset and Liability Management by a bank.

Author: Pedro Lopes dos Santos, Paulo Soares de Pinho
Reference Number: NSBE-16-15001
Number of pages: 19
Publisher: Nova School of Business and Economics
Teaching Notes: Yes
Language: English
Price: € 3,50