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Balance sheet and profit and loss account for the consolidated banking system

1. Banco de Portugal resumes in this issue of the Statistical Bulletin the publication of the balance sheet and of the profit and loss account for the consolidated banking system (see Annex D), to be updated on a quarterly basis.

Until now, the Statistical Bulletin published the balance sheet and the profit and loss account of the Portuguese banking system from December 1998 to December 2004 (see Annex A). These data ceased to be updated after December 2004.

2. From 1 January 2005 onwards, the firms with quoted securities prepared their consolidated financial statements according to the International Accounting Standards, in compliance with Regulation (EC) no. 1606/2002 of the European Parliament and of the Council, of 19 July 2002.

Regarding the financial institutions not covered by that Regulation, Banco de Portugal defined the accounting regime foreseen in Notice no. 1/2005 of Banco de Portugal. This Notice requires the application of the International Accounting Standards (IAS) in the compilation of the consolidated accounts and of the Adjusted Accounting Standards (AAS) in the compilation of the individual accounts.

The concept of AAS is very close to the IAS. There are, however, some exceptions, namely:

  • the former valuation and provision rules for the loans and advances to customers are kept;
  • the application of some of the IAS’ rules is restricted (v.g., AAS do not allow the valuation of tangible assets at fair value).

Additionally, according to the Notice no. 12/2001 of Banco de Portugal, the recognition of expenses resulting from the transition to IAS19 (employee benefits) criteria can be spread through a transition period.

During 2005, the institutions covered by the new regime had the possibility of keeping the former accounting practices. The entities which benefited from this possibility to compile their consolidated accounts, reported to Banco de Portugal their financial statements according to the IAS with reference date of 31 December 2005.

The adoption of the IAS in 2005 led to a significant change in the accounting of the main balance sheet and off balance sheet items of financial institutions. The adoption of the new rules led to the adoption of a new presentation of the financial statements of the Portuguese banking system.

However, the coexistence of different accounting regimes on a consolidated basis – the former Chart of Accounts of the Banking System (CABS) (Instructions no. 4/96 and no. 71/96 of Banco de Portugal), the AAS and the IAS – and the difficulties in establishing consistent and robust analysis between heterogeneous accounting systems (namely the typology of operations and the respective valuation criteria) resulted in the redefinition of the universe of institutions covered and of the detail of information to be disclosed.

The adoption of the IAS/AAS, by all institutions, in the beginning of 2007 made possible the stabilization of the universe of institutions to be included in the aggregate of the banking system. In particular, the universe includes the banking groups, in a consolidated basis, that include in their consolidation scope, at least one credit institution or one investment firm, and the credit institutions and the investment firms, on an individual basis, which are not consolidated in Portugal.

3. With the current edition of the Statistical Bulletin is disclosed the following information (1) related to the banking system, based in IAS/AAS accounting data (see Annex D):

  • Aggregated balance sheet of the banking system – consolidated activity.
  • Aggregated profit and loss account of the banking system – consolidated activity.
  • Aggregated balance sheet of the banking system – consolidated activity, excluding institutions with head office in Madeira off-shore.
  • Aggregated profit and loss account of the banking system - consolidated activity, excluding institutions with head office in Madeira off-shore.

Between December 2004 and December 2007, the information is made available only for the institutions/banking groups which have adopted, in the beginning of 2005, the IAS (or the AAS) for the compilation of their financial statements (see Annex C). In particular, 13 banking groups are considered, representing about 87 per cent of the total assets of the Portuguese banking system in December 2004. Additionally, to allow for an evaluation of the impact of the adoption of the new accounting rules, data for the 13 banking groups compiled according to the rules of the CABS are also made available (see Annex B).

4. The available accounting data, compiled in conformity with the IAS and AAS, is based in the requirements of Instructions no. 23/2004, no. 18/2005 and no. 30/2005 of Banco de Portugal. In the context of Instructions no. 23/2004 and no. 24/2005 of Banco de Portugal, quarterly information on the analytical situation of each institution/banking group, on both individual and consolidated basis, is collected. The consolidated analytical situation matches the consolidation scope for supervision purposes on consolidated basis. This consolidation boundary scope is in line with the accounting boundary scope defined in IAS 27 (which requires the full consolidation of all subsidiaries). However, subsidiaries with activities of a different nature (v.g. insurance, manufacturing or trade) are excluded. The main difference vis-a-vis the consolidation foreseen in the international accounting standards is related to the use of the equity method in the consolidation of subsidiaries from other sectors (in particular, concerning insurance corporations and pension funds management corporations).

5. The aggregation shown in the Statistical Bulletin gives preference to a presentation of the items by purpose, as opposed to an aggregation by type of instrument which was used in the previous tables. For example, securities are now classified according to their use (trading, investment, other), while previously they were classified by type of instrument (debt or equity) and/or by issuer.

6. Finally, the Supplement to the Statistical Bulletin published in August 2001 is still valid for the series ending in 2004, based in the CABS

(1) Historical series, as well as the actual data, are available in the statistical dissemination system in the internet BPstat | Statistics online |.