PORTUGUESE authorities are providing €4.9 billion (£3.9bn) to prevent the collapse of ailing bank Banco Espirito Santo.

Bank of Portugal governor Carlos Costa said late on Sunday the money would come from a fund set up during the financial crisis.

The bailout follows Banco Espirito Santo’s share price crashing by 75 per cent last week after it reported a record half-year loss of €3.58bn (£2.85bn) and previously unreported debts came to light at audit.

The scandal involves the Espirito Santo family, Portugal’s poshest.

Banco Espirito Santo’s healthy businesses will be spun off to new bank Novo Banco, which will keep the current staff.

The bank’s toxic assets will remain at Banco Espirito Santo, which will become a so-called bad bank.

The Bank of Portugal has acknowledged it was wrong to trust numbers provided by Banco Espirito Santo.

Mr Costa said the bank had violated financial rules and was guilty of mismanagement.

The bank is at the heart of the filthy rich Espirito Santo family’s multibillion-pound business empire on four continents.

The family’s three main holding companies have now requested bankruptcy protection.

Police suspect former bank boss Ricardo Espirito Santo Salgado of fraud, forgery and money laundering.

Mr Salgado was questioned last week and released on €3 million (£2.4m) bail.

Meanwhile, Lisbon is still seeking to cut pensions and wages of public-sector workers to pay international creditors, even after its exit from a three-year bailout.

Workers wages have already been slashed by 5 per cent.