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Portuguese Banking Regulations: A Comprehensive Overview

The Portuguese banking sector operates within a comprehensive regulatory framework, aimed at ensuring the stability and integrity of the financial system. The Bank of Portugal (BoP), as the country’s central bank and supervisory authority, sets out the rules and guidelines for credit institutions operating in Portugal.

Remuneration Policy

One of the key requirements is the implementation of a remuneration policy that ensures transparency and fairness in compensation practices. Credit institutions must disclose their remuneration policies on their website, outlining the procedures and criteria used to determine employee salaries and bonuses. The management body is responsible for ensuring compliance with these guidelines.

Key Requirements

  • Disclosure of remuneration policies on credit institution’s website
  • Outlining procedures and criteria for determining employee salaries and bonuses
  • Management body responsibility for ensuring compliance

Capital Requirements

Portuguese credit institutions are required to maintain adequate levels of capital and liquidity to absorb potential losses and ensure their stability. The capital adequacy ratio must be at least 8% of risk-weighted assets, while the liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) must be maintained at a minimum level of 100%.

Key Requirements

  • Capital adequacy ratio: at least 8% of risk-weighted assets
  • Liquidity coverage ratio (LCR): minimum level of 100%
  • Net stable funding ratio (NSFR): minimum level of 100%

Leverage Ratio

Credit institutions are also required to maintain a leverage ratio of at least 3% of Tier 1 capital. This requirement aims to ensure that banks have sufficient equity to absorb potential losses.

Key Requirement

  • Leverage ratio: at least 3% of Tier 1 capital

Banking Resolution Rules

In the event of a bank failure, the BoP has the authority to apply resolution measures aimed at minimizing disruption to the financial system and protecting depositors’ interests. These measures may include the sale or transfer of business activities, internal recapitalization, or segregation of assets and liabilities.

Key Measures

  • Sale or transfer of business activities
  • Internal recapitalization
  • Segregation of assets and liabilities

Depositor Protection

The Deposit Guarantee Fund (FGD) guarantees deposits up to €100,000 per depositor in case of a bank failure. In addition, financial intermediaries are required to adopt codes of conduct and disclose them publicly, ensuring transparency and fairness in their dealings with clients.

Key Protection

  • Deposit guarantee: up to €100,000 per depositor
  • Code of conduct for financial intermediaries

Institutional Investors

The Portuguese regulatory framework also defines institutional investors as credit institutions, investment companies, insurance companies, collective investment undertakings, pension funds, and other entities that engage in securities trading or investment activities.

Key Entities

  • Credit institutions
  • Investment companies
  • Insurance companies
  • Collective investment undertakings
  • Pension funds
  • Other entities engaging in securities trading or investment activities

Conclusion

Overall, the Portuguese banking regulations aim to ensure the stability and integrity of the financial system while protecting depositors’ interests. Credit institutions operating in Portugal must comply with these requirements to maintain their licenses and continue operations.