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Press release of Banco de Portugal on the 2015 Banking Conduct Supervision Report

Banco de Portugal publishes today its Banking Conduct Supervision Report. The report describes the regulatory and supervisory activities carried out by Banco de Portugal in 2015 in retail banking markets.

This year, the Banking Conduct Supervision Report focuses again on the implementation of the general regime and the extraordinary regime governing arrears on credit agreements.

It also addresses the challenges posed by the new digital channels used in the sale of banking products and services and the special attention they deserve from Banco de Portugal.

1 - Supervisory activities in 2015

The Bank’s more intrusive action led to a substantial increase in the number of administrative proceedings initiated.

In 2015 Banco de Portugal conducted more inspections on a greater number of credit institutions, and covered a larger area of the national territory. The Bank conducted 467 inspections on institutions’ branches, 23 inspections on central services and 525 off-site inspections, covering a total of 106 entities, 10 entities more than in the previous year. 

The increase in the number of inspections and the analysis of bank customer complaints led to a substantial increase in the number of recommendations and specific orders issued and the number of administrative proceedings initiated, which more than trebled. 

Banco de Portugal issued 1,034 recommendations and specific orders requiring 62 institutions to correct the irregularities detected, 35 per cent more than in the previous year. 

The Bank initiated 215 administrative proceedings against 45 institutions to penalise infringements on banking conduct supervision rules, which corresponds to an increase of 151 proceedings and 20 institutions compared to 2014.

Bank customer complaints declined for the second year in a row.

Banco de Portugal received 13,487 bank customer complaints against credit institutions, 5 per cent fewer than in 2014.

This decline was broadly based across most banking products, except for deposit accounts, and was largely due to a reduction in complaints about the arrears regimes.

The indexed and dual deposit market grew.

Information leaflets on indexed and dual deposits analysed by Banco de Portugal in 2015 increased by around 19 per cent from the previous year, reflecting an increase in the number of deposits sold by a greater number of institutions.

Non-compliance in advertising remains residual.

The Bank analysed 7,603 advertising campaigns on banking products of 62 credit institutions. Approximately 97.8 per cent complied with rules in force.

2 – Monitoring of arrears regimes

The extraordinary regime had a limited impact.

Data for 2015 confirm the limited impact of the extraordinary regime, despite the changes introduced by the legislator in September 2014.

Between November 2012 (when this regime entered into force) and 2015, customers submitted 2,983 requests for access to the extraordinary regime, regarding 2,635 credit agreements; approximately 77 per cent of all requests were denied; of the 565 proceedings concluded, only 312 were resolved with settlement of arrears. The extraordinary regime expired on 1 January 2016.

General regime: 327 thousand proceedings concluded with settlement of arrears.

In 2015 credit institutions initiated 701,685 proceedings with a view to settling arrears (662,635 in 2014), involving 493,230 credit agreements, with a total debt of around €5.3 billion and a default ratio of 4.1 per cent.

In the course of the year, 85,238 proceedings were concluded with settlement of arrears in housing credit and other mortgage credit (71,198 in 2014) and 242,298 in consumer credit (226,955 in 2014), corresponding to 66.1 and 42.3 per cent respectively of proceedings concluded in the same year for each type of credit.

3 – Financial information and education

The importance Banco de Portugal attaches to financial information and education of bank customers continued to be reflected in its banking conduct supervision activities in 2015. 

The dissemination of financial information chiefly focused on the Bank Customer Website, while financial education initiatives proceeded with a wide set of training courses supported by the regional network of Banco de Portugal. 

Banco de Portugal continued to cooperate with the Assistance Network for Indebted Consumers and the Directorate General for Consumers to promote financial information and education to raise awareness on legislation governing arrears prevention and management and minimum banking services. 

Banco de Portugal also continued to play an active role in the National Plan for Financial Education, together with the other financial supervisors.

4 – New digital channels pose challenges to banking conduct supervision

Banco de Portugal is concerned about the challenges posed by the growing use of the new digital channels in banking activities, more specifically security risks and transparency in the information provided to bank customers.

The use of the Internet and mobile devices (smartphones and tablets) is changing the way bank customers interact with financial institutions and access their services, with more and more customers using these channels. In Portugal, the growing use of the Internet has made financial products and services increasingly available to bank customers, most notably via homebanking. 

Banco de Portugal monitors these developments at national level and actively participates in the worldwide reflection on how to reduce risks in the use of digital channels. This ongoing reflection, which is reviewed in this Report, seeks an approach to a regulatory framework that provides for a balance between technological innovation and the protection of bank customers.

Lisbon, 17 May 2016