European markets fall as Portuguese bank Espirito Santo teeters

LISBON, Portugal, July 10 (UPI) -- European markets reacted sharply to Portuguese bank Espirito Santo missing debt payments, causing investors to question the soundness of the bank's finances.

Banco Espirito Santo's shares were suspended from trading after it fell by 17 percent, causing the PSI Index to fall by almost four percent. The bank's parent company, Espirito Santo International, missed debt payments increasing concerns about the finances of the Portugal's largest publicly traded bank and second-largest lender.

The bank's share value has spiraled all week and has lost 32 percent of its stock value this week. It has also had a domino effect on neighboring euro countries. In Spain, a bank and construction company called off planned bond sales and a Greek bond sale earned less than expected.

Banco Espirito Santo raised concerns last December in the way its parent company was valuing its assets and raising funds. The concerns caused Portugal's central bank to audit the company's accounts and found that it was in a "serious financial condition" and that there were "irregularities" in its accounting standards.

The problem reached a head this week when the company was unable to make interest payments on some of its short-term debt securities, suggesting that it was undergoing increasing financial pressure.

The bank's financial concerns also impacted U.S. stocks Thursday.