Banco de Portugal published the Summary of the Banking Conduct Supervision Activities. This publication summarises the Bank’s monitoring of retail banking markets during the first half of 2015.

During the first six months of the year, Banco de Portugal continued to pay special attention to the implementation of the arrears regimes, given their importance for the financial situation of households, the monitoring of pre-contractual information and compliance with the duty to assist customers before entering into an agreement.

Arrears regimes

In order to monitor the implementation of the arrears regimes, Banco de Portugal analysed the information reported by credit institutions, carried out inspections, analysed bank customer complaints and issued recommendations and specific orders.

Within the implementation of the general arrears regime, credit institutions initiated 365,091 proceedings under the Out-of-court Arrears Settlement Procedure (OASP) in the first half of 2015, a five per cent increase compared with the second half of 2014.

In the home loan segment, 62.9 per cent of the OASP proceedings were concluded with a settlement and, in the consumer credit segment, 38.4 per cent. The majority (94 per cent) of settlements involved the payment of arrears. Renegotiations continued to be the main proceeding used where there is an agreement between the parties. For mortgage agreements, the main solution was establishing grace periods for principal and/or interest and, for consumer credit, deferring payment of principal until the last instalment.

As regards the implementation of the extraordinary arrears regime, in the first half of 2015, credit institutions received 295 requests for access to the extraordinary regime for arrears settlement in home loan agreements (16.2 per cent less than in the second half of 2014). Of these, 47 proceedings were concluded and 221 requests were denied, mostly due to lack of documentation on the part of bank customers or non-compliance with the requirements of this regime.

Systematic monitoring

During the first half of 2015, Banco de Portugal, in its systematic monitoring of retail banking markets:

• Analysed 323 fees and expenses leaflets reported by 64 institutions and 274 interest rate leaflets reported by 86 institutions;
• Analysed 3,705 advertising materials, of which 2.2 per cent did not comply with the applicable regulation;
• Assessed the compliance of 142 information leaflets on indexed and dual deposits before these were offered for sale and the calculation of the rates of return of 75 indexed deposits and 15 simple components of dual deposits that matured in the first half of 2015. Four institutions have entered this segment of the market, totalling 16 institutions at the end of the first half of the year;
• Assessed compliance with maximum rates in 685,532 new consumer credit agreements, reported by 55 institutions.

Inspections

In the first half of 2015, the monitoring of the arrears regimes remained a priority for Banco de Portugal’s inspection activities. The procedures, internal controls and information systems used by institutions to handle customers’ arrears situations were assessed through 11 inspections of their central services. 

Banco de Portugal also considered it a priority in their inspection activities to monitor payment services and consumer credit, in particular car loans and credit cards. The inspections paid particular attention to pre-contractual information and compliance with the duty to assist customers, as this is an important phase for customers when researching and negotiating a loan. This assessment was carried out through 104 inspections covering 29 institutions, mostly of branches, but also of the so called “points of sale” where access to credit granted by institutions is frequently provided.

Banco de Portugal also performed a cross-cutting analysis of compliance with the legal framework applicable to fees charged for retail banking products and services. This analysis covered 67 institutions through 226 off-site inspections, focusing mostly on an analysis of the price list and other information provided by institutions.

Bank customer complaints

In the first half of 2015, Banco de Portugal received 6,602 bank customer complaints against credit institutions, a monthly average of 1,100 complaints (a seven per cent decrease compared with the monthly average of 2014). An analysis of complaint proceedings shows that:

• Deposit accounts were the most complained subject , accounting for around 32.5 per cent of total complaints. The monthly average of complaints on this subject increased by 6.3 per cent compared with 2014;
• The monthly average of complaints on consumer credit and home loans decreased compared with 2014 (-12.9 per cent and -4.7 per cent respectively). The decrease in complaints on arrears situations concerning credit agreements (-29 per cent) contributed significantly to these developments.

Correction of irregularities and sanctions

In the first half of 2015, Banco de Portugal issued 553 recommendations and specific orders requiring 40 institutions to correct irregularities and breaches detected. Of these, around half focused on the legal and regulatory framework applicable to the arrears regimes.

Within the scope of its banking conduct supervision, Banco de Portugal initiated 69 administrative proceedings against 45 institutions in the first half of 2015.

Lisbon, 23 September 2015