Although the 2008 financial crisis triggered further legislation to protect banking clients and investors, the relationship between banks and customers had been a focus of legislators and regulators long before the banking collapse. Rules and regulations in this regard concern deposit compensation, bank-client relationships, consumer complaints, breaches of contract, residential mortgage loans and minimum information duties.
The Banking Law establishes that the management and supervisory bodies of credit institutions in Portugal are responsible for defining, overseeing and implementing adequate governance to ensure the institutions' effective and prudent management, including the segregation of duties and the prevention of conflicts of interest. Further, banks must disclose information regarding the remuneration of corporate bodies and employees to the Bank of Portugal or the Single Supervisory Mechanism.
Following the 2008 banking crisis, the Banking Law was amended to protect depositors of all credit institutions and safeguard the stability of the EU banking system as a whole. Under the law, the Bank of Portugal may apply a number of resolution measures to failing institutions which do not involve obtaining prior consent from their shareholders or a third party. It can also create a resolution fund, which aims to provide financial support for the implementation of measures to help failing credit institutions.
The Portuguese supervisory system has changed following the recent establishment of a single supervisory mechanism and a single resolution mechanism, which are comprised of the European Central Bank (ECB) and national competent authorities. The ECB is responsible for the overall functioning of the single supervisory mechanism and the single resolution mechanism, as well as having direct oversight of eurozone banks in cooperation with national supervisory authorities.
The Bank of Portugal has issued a notice on the applicability to payment institutions of a number of previously issued regulatory notices. Among other things, payment institutions must comply with its notices on uses of own funds, provision for credit and other risks, the provision of client information and the requirement to prepare consolidated and non-consolidated financial statements.
The Council of Ministers has approved a legislative decree that transposes the EU Payment Services Directive into Portuguese law. In addition to defining the categories of entity that may provide payment services, the decree stipulates prudential requirements for such entities and requires them to guarantee the transparency of the conditions and information requirements relating to their services.
As a result of a new legislative decree, the legal framework governing banking practices for the granting and renegotiation of mortgages - which covers interest calculation, early repayment, associated sales and duties of information and disclosure - now applies to other loans secured by the same property.
A new legislative decree sets out the information duties of credit institutions that wish to link life insurance contracts to mortgages. It reinforces consumer protection measures by establishing the required minimum content of life insurance contracts that may be offered to persons seeking a mortgage.
The Portuguese legislature has once again reacted to the problems in the financial sector, introducing changes to promote the disclosure of information about board-level remuneration in public-interest entities, including in the banking sector, and tasking the Bank of Portugal to supervise the credit institutions' lending to certain borrowers.
The Bank of Portugal has published details of a regulatory initiative that would impose greater duties on credit institutions to disclose the list of fees and interest rates that they levy on products and services. A notice and instruction set out details of the information required and the manner of its presentation.
The ongoing financial downturn has kept Portugal's legislature busy. Recent months have seen the creation of a special state guarantee scheme for Portuguese credit institutions, changes to the bank deposit guarantee scheme and new provisions on capital adequacy. In addition, the Bank of Portugal has intervened to appoint members to the board of the troubled Banco Privado Português.
A banking institution that is asked to provide information on a deposit account as part of a criminal investigation may refuse to do so only on the grounds of bank secrecy. If the institution's refusal is legitimate, the court immediately above the trial court must rule on whether the principle of secrecy may be overruled under Article 135(3) of the Code of Criminal Procedure.
The Supreme Court has ruled that a bank can be held liable in negligence by a cheque holder when it complies with a cheque countermand from a customer before the time limit for presentment expires. This decision challenges the view that a bank’s duties in relation to the drawing of a cheque are owed to the customer only. However, the court's reasoning offers banks a possible solution.
The Bank of Portugal has been limited in its ability to respond to complaints from customers of Portuguese banks because of uncertainty about its power to monitor banks' compliance with conduct of business rules, particularly those relating to banks' fiduciary duties to customers. A new decree-law may be a first step towards a more powerful supervisory role for the Bank of Portugal.
Rules which prevent banks from applying inequitable interest rate calculation methods to mortgages have been widely praised in the media. However, the extension of the measures to other banking operations, including financing arrangements with professional borrowers, is less welcome news for the industry.
A new regime for mortgage lenders, which applies to existing and future agreements, caps prepayment penalties, imposes new conditions on potentially misleading promotional information and prohibits the linking of mortgages to the acquisition of other credit facilities, such as credit cards and insurance.
The Winding-Up Act implements the EU Directive on the Reorganization and Winding-Up of Credit Institutions, setting out new regulations for the reorganization and winding-up of credit institutions, financial companies and investment firms, including branches of credit institutions which are established in an EU member state and authorized in Portugal.
The Bank of Portugal has recently announced the entry into force of its Banking Deposit Regulation. The regulation is applicable to credit institutions which are incorporated in Portugal or have a branch there. It requires credit institutions to gather and retain more information on account holders and is expected to have a significant impact on money-laundering controls.
The Bank of Portugal recently published a new regulation which modifies the rules on the collection and payment of debts, specifically those covering the debiting of bank accounts under authorizations granted by the debtor to the creditor. It amends two earlier regulations and aims to improve the regulatory regime that applies to this method of payment.
Following the enactment of the EU International Accounting Standards (IAS) Regulation, Bank of Portugal has issued various regulations which, among other things, require companies under the bank's supervision to prepare their consolidated and annual accounts in conformity with IAS.