The 2012 Report describes the amendments to the legal framework applicable to retail banking markets, and presents the supervision activities and financial education projects carried out throughout the year and the main issues on the agenda of international banking conduct supervision fora in which Banco de Portugal participates. The Report also publishes the Bank’s views on the charging of retail banking market commissions and financial education in schools.

In 2012 a new legal framework on the prevention and settlement of arrears on credit agreements with household customers was published, the legal framework of minimum banking services was revised and the legal framework of mortgage credit was amended.

Banco de Portugal required institutions to classify payment cards correctly and defined best practice on the charging of their commissions.

The Bank also defined best practice on foreign currency lending and published explanations on the application of the principle of equality of charges for cross-border payments in the European Union.

Banco de Portugal systematically monitored advertising of bank products and services, pre-contractual information on indexed and dual deposits and compliance with maximum rates in consumer credit.

The Bank stepped up its inspections at the counters and central services of credit institutions (a greater number of inspected institutions; greater geographical coverage of counters) and analysed bank customer complaints against credit institutions. 

Banco de Portugal required supervised institutions to correct non-compliance situations or irregularities detected by issuing specific orders and started administrative proceedings, applying sanctions to more serious situations.

The Bank promoted initiatives for the financial information and education of bank customers, actively participating in the National Plan for Financial Education.

Two regimes were established: a general regime, establishing measures to promote the prevention of arrears situations (a Pre-arrears Action Plan) and the out-of-court settlement of default situations (Out-of-court Arrears Settlement Procedure) on credit agreements, and an extraordinary regime for protection of housing loan borrowers in a very difficult economic situation.

Banco de Portugal regulated credit institution information requirements under the general regime and issued guidelines on the coordination between both regimes.

The Assistance Network for Indebted Consumers was created, comprising entities accredited to provide information, advice and assistance to bank customers having difficulty complying with their financial commitments.

The legal framework of minimum banking services can now be accessed by all persons holding only one demand deposit account. Banco de Portugal regulated credit institutions’ duty to make known their decision to sign the protocol on the provision of minimum banking services as well as the access conditions to these services.

The legal framework of mortgage credit, which already applied to related loans (crédito conexo), was extended to all other credit agreements which are backed by residential mortgages or other rights on immovable property. By regulation of Banco de Portugal, pre-contractual information requirements applicable to mortgage credit agreements are now also applicable to these agreements.

Banco de Portugal required institutions to classify their payment cards according to their characteristics and established that commissions charged to retailers associated with the acceptance of payment cards (service charges to retailers) shall reflect the nature of the transaction (credit or debit) and not the type of card used. 

Banco de Portugal analysed 4,942 advertising campaigns on banking products and services of 58 institutions and required 97 to be changed and 14 to be suspended. Campaigns on consumer credit products had the highest number of non-compliances with applicable rules.

The Bank assessed 65 information leaflets and 47 advertising campaigns on indexed and dual deposits before they were sold, keeping pace with this market’s significant growth. Banco de Portugal required institutions to comply with criteria for accurate, transparent and complete information in all situations.

The Bank assessed compliance with maximum rates in all new consumer credit agreements (1.2 million agreements of 55 credit institutions).

Banco de Portugal’s inspections monitored pre-contractual information (specifically the provision of standardised information sheets and compliance with the duty to assist customers before they enter into an agreement on a deposit or credit product), given the relevance of this search and negotiation stage in customers’ decision. These inspections focused on:  

• Price list: 375 inspections on 74 institutions;
• Reported leaflets: fees and expenses leaflets (796) and interest rate leaflets (514);
• Simple deposits and demand deposit accounts: 848 inspections on 65 institutions;
• Housing loans: 361 inspections on 48 institutions;
• Consumer credit: 554 inspections on 68 institutions;
• Payment services: 522 inspections on 66 institutions; and
• Complaints book: 57 inspections on 28 institutions.

Banco de Portugal received 15,603 complaints from bank customers against credit institutions, through which it monitored compliance by complainees with applicable rules. Complaints received increased by 6.2 per cent from 2011, by contrast with the decreases seen in previous years. 

The analysis carried out by Banco de Portugal concluded that there was no evidence of infraction on the part of the credit institution in 44 per cent of the complaint processes finalised. As to the remaining complaints, the credit institution took measures to remedy the situation, either on its own initiative or following a recommendation and/or a specific order by Banco de Portugal. 

On average, complaint processes were finalised in 36 days, 12 days less than in 2011.

Banco de Portugal issued 1,102 recommendations and specific orders, requiring supervised institutions to correct non-compliance situations or irregularities detected, covering payment services (32 per cent), price list transparency rules (16 per cent), consumer credit (15 per cent), deposits and their accounts (13 per cent), housing loans (12 per cent), advertising (10 per cent) and the Complaints Book (2 per cent).

Banco de Portugal initiated 34 administrative proceedings against 15 institutions: 

• 15 for non-compliance with specific rules regulating the activity of credit institutions;
• 8 for non-compliance with rules regulating the provision of payment services;
• 5 for non-compliance with the legal framework of the Complaints Book;
• 4 for simultaneous non-compliance with rules regulating the activity of credit institutions and the provision of payment services;
• 1 for non-compliance with rules of conduct laid down in the Legal Framework of Credit Institutions and Financial Companies;
• 1 for simultaneous non-compliance with rules regulating the activity of credit institutions and the provision of distance payment services.  

34 administrative proceedings were settled within banking conduct supervision (23 carried forward from previous years and 11 initiated in 2012).

The number of visits to the Bank Customer Website increased by 43% from 2011, with a daily average of 6,336 page visits. Banco de Portugal began publishing on the Bank Customer Website information on compensation paid on indexed and dual deposits and the list of out-of-court dispute resolution entities which payment and credit institutions have adhered to. 

Banco de Portugal participated in the National Plan for Financial Education, in cooperation with the other financial supervisors (Comissão do Mercado de Valores Mobiliários – CMVM (Portuguese Securities Market Commission) and Instituto de Seguros de Portugal – ISP (the Insurance and Pension Funds Supervisory Authority)). In 2012 the Principles for Financial Education Initiatives were published, the Todos Contam (Everybody Counts) website was launched and Financial literacy Day was held. In cooperation with the Ministry of Education, Core Competences for Financial Education (for pre-primary, primary and secondary education and adult learning) were prepared and the Todos Contam (Everybody Counts) competition was launched.

The Report presents analysis of regulating the charging of retail banking market commissions, analysing the guiding principles that should apply to it. The Report also presents international experience illustrating the implementation of these principles, describes the legal framework in force in Portugal and analyses the implementation of the guiding principles.

The Report also presents analysis of the introduction of financial education into school curricula, the selection of appropriate content, the preparation of education instruments and material and teacher training. In addition, it addresses the methodologies used to assess the impact financial education programmes have on schools.

Lisbon, 9 May 2013