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 2016 in retail banking markets.

In this Report Banco de Portugal also focuses on the sale of banking products and services via digital channels.

1 – Sale of banking products and services via digital channels: challenges and situation in Portugal

Banco de Portugal has been reflecting on the challenges posed to regulation and supervision by the use of digital channels in the sale of banking products and services. In this field, the main challenge for regulation is to ensure that bank customers have the same level of protection regardless of the channel used to acquire banking products and services or the services provider.

Among other issues, Banco de Portugal is assessing how the legal framework should allow processes such as opening a deposit account or entering into consumer credit to be carried out in through exclusively digital means.

In 2016 Banco de Portugal requested supervised institutions to answer a questionnaire to assess the use of digital channels in Portugal. According to the questionnaire’s results, at the end of 2016 almost all (around 90%) of the surveyed institutions provided online banking products and services to private customers. The digital channels’ customer usage rates are still low, but are nevertheless higher than on the online channel. Institutions anticipate high growth in demand for digital channels, which may be held back by customer concerns with security and personal data sharing. However, institutions are mitigating security risks by implementing a number of mechanisms that when combined reduce the probability of incidents occurring in digital channels. 

 
2 - Supervisory activities in 2016

In 2016 Banco de Portugal reinforced the supervision of consumer credit through inspections of institutions’ branches and central services, given the buoyancy of this type of credit. Inspections also analysed with caution the institutions’ implementation of changes to the legal framework. Over the course of the year, the Bank conducted a total of 132 inspections of branches and 66 inspections of central services of supervised institutions, as well as 612 off-site inspections. 

Banco de Portugal also assessed the transparency and completeness of the information provided in institutions’ price lists, analysing 726 fees and expenses leaflets and 496 interest rate leaflets. 

It assessed 8,572 advertising campaigns of institutions, i.e. 13% more than in 2015, where it detected a higher non-compliance rate (2.6%) than in 2015.

Banco de Portugal checked 197 leaflets on indexed and dual deposits submitted to its approval, i.e. 24% fewer than in the previous year, in line with the lower number of deposits sold. It also analysed the calculation of returns on 223 indexed and dual deposits due. 

In addition, the Bank checked compliance with the maximum rates in 1,582,788 consumer credit agreements.

Banco de Portugal received and handled 14,141 bank customer complaints against credit institutions, i.e. 4.8% more than in the previous year, but below the share recorded in 2014. In 64% of the complaints closed, Banco de Portugal concluded that there were no signs of infringement; in the remaining 36% the complaint was solved by the institution on its own initiative or on Banco de Portugal’s intervention.

To correct the irregularities detected in its supervisory activities, Banco de Portugal issued 1,020 recommendations and specific orders to 73 institutions, mostly regarding consumer credit which was the main inspection priority in 2016.

Banco de Portugal initiated 155 administrative proceedings against 29 institutions to penalise infringements on banking conduct rules. The more frequent subject matters were the incorrect reporting by institutions to the Central Credit Register (43 proceedings), irregularities related to bank deposits (42), and consumer credit and loans for other purposes (32).

3 – Monitoring of arrears regimes

Banco de Portugal continued to assess the implementation of the general arrears regime.

In 2016 credit institutions initiated 718,479 arrears settlement proceedings, i.e. 2.4% more than in 2015. These proceedings involved 523,825 credit agreements, 85% of consumer credit and 15% of mortgage credit, with a total debt of €4.9 billion (€5.3 billion in 2015).

Over the year, institutions concluded 686,651 arrears settlement proceedings. Half of these (49.2%) led to the settlement of arrears. Credit institutions claimed that proceedings were concluded mostly due to bank customers paying their overdue debt. 

4 – Financial information and education

Given the importance of financial literacy for the protection of bank customers and the stability of the financial system, Banco de Portugal has been focusing on developing financial information and education initiatives individually and in the scope of the National Council of Financial Supervisors.

In 2016, with the support of its branch and its network of agencies and delegations, Banco de Portugal organised 350 financial education training sessions, with a total of 12,122 participants.

Within the scope of the National Council of Financial Supervisors, Banco de Portugal participated in the National Plan for Financial Education. In 2016 the Plan’s strategic guidelines for 2016-20 were released, reinforcing the commitment of Banco de Portugal and other financial supervisors to financial education. In addition, the results of the second Survey on the Financial Literacy of the Portuguese Population were published, as a follow-up to the survey conducted by Banco de Portugal in 2010. This Report compares the main results of the 2010 and the 2015 surveys.