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Banco de Portugal's press release on the Annual Report – Activities and Financial Statements 2016

Banco de Portugal releases today the Annual Report – Activities and Financial Statements 2016.

I – Banco de Portugal Accounts

The balance sheet of Banco de Portugal increased €20,818 million in 2016, to €137,717 million.

At the end of 2016, the total balance sheet of Banco de Portugal amounted to €137,717 million (€116,899 million in 2015). The increase from the total balance sheet recorded in 2015 was chiefly due to the sharp increase in the portfolios of securities held for monetary policy purposes (from €16,690 million in 2015 to €32,254 million in 2016). This resulted from the ongoing purchasing of securities for portfolios in the asset purchase programme (APP), in particular the Public Sector Purchase Programme (PSPP). This effect was partly offset by the decrease in place since 2012 of the lending monetary policy operations.

There was also an increase in the foreign reserves and euro assets of Banco de Portugal (from €23,308 million in 2015 to €24,606 million in 2016), an increase in the market value of gold and the positive development of the Eurosystem's banknotes in circulation.

Net profit was €441 million, representing a rise of €208 million, after a €200 million reinforcement of the general risk provision. Total dividends and income tax for 2016 amounted to €527 million.

Banco de Portugal's net profit for the year 2016 totalled €441 million, a €208 million increase from 2015. This comes after a €200 million reinforcement of the general risk provision (following the €480 million increase of 2015). Among other factors, the reinforcement of the general risk provision takes into consideration the overall financial risk position faced by Banco de Portugal over the medium term, calculated in accordance with the methodologies and instruments used by the Eurosystem to measure financial risks. Over the last few years, Banco de Portugal has not altered its policy on the general risk provision.

Income before the general risk provision reinforcement and taxes increased by €46 million, amounting to €850 million. This was chiefly driven by:

  • the increase in the interest margin (+€223 million), due largely to the increase in interest on securities held for monetary policy purposes (in particular the PSPP's government securities component), which more than offset the general reduction in average yields;
  • the increase in the net result of pooling of monetary income (+€88 million).

These effects were partly offset by the reduction in realised gains/losses arising from financial operations.

The net profit enabled the distribution of dividends to the State to the amount of €352 million (€186 million in 2015). Total dividends and income tax for 2016 amounted to €527 million (€277 million in 2015).


II – Activity

Banco de Portugal concluded the implementation of the Strategic Plan 2014-2016, consolidating its integration into Banking Union structures.

In 2016 within the scope of the Single Supervisory Mechanism, Banco de Portugal participated in the supervision of significant credit institutions, under the responsibility of the European Central Bank, was responsible for the direct supervision of less significant institutions, and intervened in the common procedures regarding the application for authorisation of credit institutions and the acquisition of qualifying holdings. In 2016 Banco de Portugal assessed the suitability, qualifications, professional experience and incompatibilities related to the registration of 1,400 members of corporate bodies of the institutions under supervision, more than double those registered in the previous year.

Banco de Portugal participated in the implementation of the Single Resolution Mechanism, which, since 1 January 2016, has been responsible for ensuring a common approach in the treatment of insolvent banks in Europe. It intervened in the committees of the Single Resolution Board- and in the internal resolution teams created by the mechanism and participated in the implementation work of the Single Resolution Fund. Simultaneously, Banco de Portugal continued the implementation of the resolution measures applied to Banif and BES, and relaunched the sale process of Novo Banco.

In the field of banking conduct supervision, Banco de Portugal strengthened the supervision of consumer credit, particularly revolving credit products (namely credit cards, overdraft facilities and overrunning), given the buoyancy of this market.

In its capacity as national macroprudential authority, Banco de Portugal reviewed the risks to financial stability and adopted measures to minimise the probability of their materialisation and to heighten the resilience of the financial system.

Significant increase in administrative proceedings concluded.

In 2016 Banco de Portugal concluded investigations in especially complex administrative proceedings, which resulted in a considerable increase in the number of proceedings concluded. Banco de Portugal concluded a total of 217 administrative proceedings, 135 more than in the previous year.

In the field of money laundering and terrorist financing prevention, Banco de Portugal issued 135 corrective measures, eight notices to the Prosecutor-General's Office and the Criminal Police and two crime notifications.

Two key monetary policy projects were concluded, expediting Portuguese credit institutions’ access to Eurosystem operations.

Banco de Portugal concluded the reformulation of the information systems used in monetary policy operations with the Portuguese financial system, implementing one of the main projects of the Strategic Plan 2014-2016. The new systems make it possible to improve speed, increase efficiency, and reduce costs and risks in processing the Eurosystem’s operations with domestic institutions.

Banco de Portugal also provided credit institutions with a new credit rating tool for access to Eurosystem credit operations – the In-house Credit Assessment System.

Migration of the Portuguese community to TARGET2-Securities.

Banco de Portugal, Interbolsa and the national community successfully migrated, on the scheduled dates, to TARGET2-Securities, the new pan-European platform for the settlement of securities in central bank money, thus contributing to financial market integration in Europe.

Internal ethics and conduct regulations were strengthened.

Banco de Portugal strengthened the ethics and conduct regulations applicable to its staff, the Members of the Board of Directors and the Members of the Board of Auditors: it published new codes and a new conduct regime, in line with the Eurosystem’s and Single Supervisory Mechanism’s standards, and created an Ethics Committee.

Launch of a new institutional website and inauguration of the Money Museum.

Reflecting its strategic objective of openness to society, Banco de Portugal launched a new institutional website and inaugurated the Money Museum, in the Pombaline Baixa, subsequently nominated for the European Museum of the Year Award (EMYA).

With a view to promoting financial literacy, Banco de Portugal organised 350 financial training sessions across the whole country, which gathered over 12,000 participants, and was also involved in the initiatives of the Portuguese National Plan for Financial Education, in partnership with the Securities Market Commission and the Insurance and Pension Funds Supervisory Authority.