the extension of the measures taken and the adoption of additional supervisory instruments further advanced the intrusive and forward - looking approach to supervision. banco de portugal deems it necessary to ensure that portugal ’ s banking institutions continue their efforts to adapt their balance sheet structures, their business and internal governance models and necessarily their risk management processes, while ensuring adequate solvency levels that incorporate all the relevant risks to which they are or may be exposed. among other measures, the situation has led to various initiatives from the bank recently, including the publication in may of a circular - letter with guidance on capital planning, designed to strengthen levels of own funds in all their forms ( core tier 1, tier 1 and total ), above the minimum regulatory ratios in force, in order to create capital buffers that can withstand unforeseen events. banco espirito santo group 1. banco espirito santo group structure and activity banco espirito santo, s. a. ( bes ) is the third largest banking group in portugal, with assets of eur 76. 6 billion as at march 2014, deposits of eur 37. 3 billion, liabilities of eur 13. 7 billion in the form of securities, and funds from other credit institutions of eur 4. 2 billion. the common equity tier 1 ratio ( cet1 ) ( phasing - in ) in march 2014, with the effect of the capital increase of june included, came to 11. 3 % ( cet1 capital reaching eur 7. 1 billion ). it was thus 434 basis points above the regulatory minimum ( which corresponds to a eur 2. 1 billion capital buffer ). bes group ’ s total capital ratio is 12. 8 % under the same assumptions. bes group ’ s activity covers the most important business segments, such as retail, corporate and institutional clients, offering a variety of financial products and services through a diversified distribution network. bes group is present on four continents and in 25 countries, and employs around 10, 000 staff. in portugal, bes group has around 650 branches and a network of 22 private banking centres. in the corporate segment, bes has a domestic market share of 25. 5 % and operates through a network of 25 corporate centres, that serve the medium - sized enterprises subsegment and a group of teams split between lisbon and porto dedicated to the large enterprises subsegment. most of bes group ’ s international activity is carried out directly

##see a significant negative impact on bes ’ s capital position resulting from the financial situation of its subsidiary bes angola ( besa ). given that the guarantee from the angolan state covers a substantial part of the credit portfolio and that there is close collaboration between the authorities of both countries, banco de portugal hopes that this subsidiary ’ s position is clarified in the near future and without material impact on bes. nevertheless, banco de portugal ordered bes to present additional recapitalisation measures, namely measures to accommodate any insufficiency arising from the comprehensive assessment that ecb is currently undertaking. in order to assuage doubts and ensure the review of bes group ’ s accounts is complete and clear, banco de portugal also ordered that an independent audit be conducted in addition to the credit portfolio review being carried out under the comprehensive assessment. in addition, banco de portugal requested a forensic audit to confirm full compliance with all the prudential ring - fencing orders issued regarding ges ’ s non - financial entities. the preliminary interactions between bes and international investment banks, as well as the interest shown by various entities ( investment funds and european banks ) in taking up reference holdings in bes, showed that a private solution to strengthen its capital is feasible. however, if necessary, eur 6. 4 billion are available from the public recapitalisation line, created under the economic and financial assistance programme, and may be used to support any capital need of a portuguese bank, under the relevant legal framework and state aid rules. despite having solvency levels above the regulatory minimum, the media impact of the ges situation, bes ’ s rating downgrade and the performance of the cds spread have put bes ’ s shares under great pressure and high volatility. in terms of liquidity, banco de portugal will remain available to support any needs should its liquidity position deteriorate. bis central bankers ’ speeches 4. changes to internal governance and restructuring of senior management as mentioned above, hand - in - hand with successive requests to ring - fence bes from the non - financial arm of ges, and more recently from esfg and its subsidiaries, banco de portugal ordered bes to strengthen its internal governance model, with particular regard to independence and prevention of conflict of interests, and to restructure its management body to eliminate situations in which management roles in other ges entities accumulate and lead to harm to bes group. the restructuring of bes ’ s management body