Manufacturing a crisis: Bond fund manager Pimco overestimated the amount of money needed to recapitalize banks in Cyprus last year. The exaggeration of the banks’ financial problems led to a run on the banks and was used to justify a hard line by European authorities, turning what might have been merely a capital shortfall into a full-blown sovereign debt crisis. Other outside analysts discovered the flaws in Pimco’s analysis, but that information was kept secret from the government by officials at the central bank until economists reconstructing the analysis found the same errors.
Raising capital: East Los Angeles-based Pan American Bank got $6 million in new capital from 16 California banks. The deal was structured to avoid disrupting the bank’s current governance, though the interim CEO concedes significant changes will be needed in operations. Regulators had ordered the bank to raise capital and replace its management.
Arrested: The former head of the troubled Banco Espírito Santo in Portugal had hoped to retire quietly this month after his family lost its controlling interest in the bank. Instead, yesterday he was arrested and taken into court as part of an international asset management investigation. He was released on €3 million bail. It is not clear how the investigation might be related to the financial scandals surrounding the bank.
Under investigation: The Fed says Deutsche Bank has a long list of accounting errors in its U.S. financial reporting, including many problems that have gone uncorrected for years, in a report cited by the Wall Street Journal. The bank is expected to restate some of its past financial statements.
Failed: The O.C.C. closed Chicago’s GreenChoice Bank. The three branches and $71 million in deposits are being transferred to Providence Bank. The failed bank had tied its identity to a mission of sustainability.