Around 14 asset managers including BlackRock, Inc. BLK and Pacific Investment Management Company, LLC (PIMCO) have commenced legal action against the Portuguese central bank after it took the contentious decision to transfer five bonds of about €2 billion ($2.2 billion) from Novo Banco to a “bad bank” last December.Novo Banco, the “good bank” was created from the split of Lisbon-based Banco Espirito Santo (BES) after BES collapsed and resulted in a €4.9 billion ($6 billion) bailout by the central bank in Aug 2014. Per the rescue plan, BES was split into two wherein the sound assets – primarily the deposits, senior debt and other healthy assets – were transferred to the newly formed bank “Novo Banco,” while the problem assets remained with the “bad bank” – BES – which is currently being liquidated.The Bank of Portugal’s move to retransfer the five bonds to BES came after the stress tests conducted by European Central Bank in November last year revealed a shortfall of €1.4 billion in Novo Banco. In a statement released on Dec 29, 2015, the central bank had stated, “This measure is necessary to ensure that, as stipulated in the resolution regime, the losses of Banco Espírito Santo, S.A. are absorbed by this institution’s shareholders and creditors and not by the resolution fund or the taxpayers.” The release also noted that the selection of the concerned bonds “was based on public interest and aimed to safeguard financial stability and ensure compliance with the purposes of the resolution measure applied to Banco Espírito Santo, S.A.”However, this sparked rage among investors as they suffered losses stemming from the transfer of the concerned bonds. Investors alleged that the central bank discriminated against them by inflicting losses on certain bondholders, leaving the others unscathed.According to a recent release by Bloomberg, the transferred notes plummeted to about 10 cents on the euro on Dec 30 from more than 90 cents prior to the announcement of the Portuguese central bank, and are currently quoted at around 22 cents.The latest suit by the 14 asset managers filed last week, accused the Portuguese central bank of violating fundamental principles including fair treatment of creditors and discriminating on the basis of nationality. The group of money managers is also demanding recovery of the investments.A BlackRock spokesman stated, “The Bank of Portugal’s actions have resulted in money being unfairly taken out of the pockets of individual pensioners and savers, to benefit Novo Banco,” He also added, “BlackRock has chosen to participate in this suit because it is in the best interests of our clients.”Notably, the Portuguese central bank’s move has provoked a string of investor lawsuits seeking to restore losses incurred due to the bond transfer.Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report BLACKROCK INC (BLK): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research