Financial Institutions in Portugal Under Scrutiny: Compliance Procedures and Director Accountability

Portugal’s financial institutions are subject to rigorous compliance procedures to ensure adherence to regulatory requirements. The country’s laws focus on establishing internal structures and policies that guarantee compliance, rather than detailing specific content for these programs.

Internal Control Systems

Financial entities in Portugal must establish integrated permanent procedures to implement their strategies effectively. These systems should be consistent across all offices and adequate considering the entity’s size, complexity, and risks involved. The internal control system should also take into account potential negative impacts resulting from breaches of laws, regulations, or contracts that may lead to legal sanctions, limitations on business opportunities, or the impossibility of demanding contractual obligations.

• Key Components:
  • Consistency across all offices
  • Adequacy considering entity size, complexity, and risks involved
  • Consideration of potential negative impacts

Gatekeepers Play a Crucial Role

Chief compliance officers and internal auditors are essential in ensuring the effective implementation of these procedures. They must be vigilant in identifying potential risks and take prompt action to mitigate them.

• Responsibilities:
  • Identifying potential risks
  • Mitigating risks through prompt action
  • Maintaining a robust control environment

Director Accountability

Directors of financial institutions may face severe consequences for breaches of regulatory provisions or failure to implement adequate control systems. They can be held liable for damages caused to creditors, shareholders, and third parties.

• Consequences:
  • Severe penalties for breaches
  • Liability for damages to creditors, shareholders, and third parties

Protecting Retail Customers

The standard of care for financial institutions when dealing with retail customers in Portugal is the highest level of diligence. This includes providing adequate information regarding service fees, risks associated with financial instruments, and specific duties to inform clients about investment services.

• Requirements:
  • Providing adequate information on service fees
  • Informing clients about investment services

Rule-Making Process

The Bank of Portugal and the Securities Commission play a significant role in the legislative process for laws affecting the financial services industry. While there is no mandatory consultation process, public consultations may be carried out depending on the relevance and complexity of the subject matter.

• Involvement:
  • The Bank of Portugal
  • The Securities Commission