The central bank intervention into the failed Portuguese bank, Banco Espirito Santo, earlier this month has been designed to resolve the bank's situation without any cost to taxpayers.The governor of Portugal's central bank, Carlos da Silva Costa, gave a speech in Lisbon last week shedding light on the bank's failure and the central bank's resolution of the matter.Early last month Banco Espirito Santo confirmed that it had a capital buffer large enough to accommodate possible negative impacts arising from its exposure to the non-financial arm of Grupo Espirito Santo without jeopardising its compliance with required minimum capital ratios.However, at the end of the month it announced a loss of €3.5 billion and said it no longer complied with its minimum capital ratios.What happened in between was that it made a placement of securities in group companies, leading to a loss of €1.2 billion. It also issued comfort letters to institutional investors, which led to a €267 million loss being recognised.The actions taken were not reported to Banco de Portugal. Trade in the bank's stock was suspended on August 1.Da Silva Costa said the non-financial entities of Grupo Espirito Santo had developed a fraudulent inter-company funding scheme. When the problem was identified in 2013 Banco de Portugal started a ring-fencing operation. As a result of the ring-fencing of the bank from other group financial arrangements the group started to default.Banco de Portugal stepped in with a resolution measure - the creation of a new bank, Novo Banco, to which Banco Espirito Santo's essential activities were transferred.The new bank's equity capital is held by a resolution fund, whose financial resources do not include public funds. The resolution will not be at taxpayer expense, although the resolution fund has taken out a state loan.The liabilities of other Grupo Espirito Santo entities that led to the losses were not transferred to the new bank. Those risks remain in the balance sheet of Banco Espirito Santo. Da Silva Costa said the rapid and significant deterioration of the bank meant that a capitalisation solution through private funds was not feasible. One of the tasks of the board of the new bank will be to promote the acquisition of significant holdings in the bank by private investors.