Summary of the Conduct of Business Supervision Activities of Banco de Portugal – 1st half of 2016

Today, Banco de Portugal publishes the Summary of the Conduct of Business Supervision Activities. This publication summarises the Bank’s monitoring of retail banking markets during the first half of 2016.

During the first six months of the year, Banco de Portugal continued to monitor the implementation of the arrears regimes governing mortgages and consumer loans, and proceeded with its systematic monitoring and inspections in retail banking markets. It also continued to analyse bank customer complaints and to correct irregularities detected within institutions.

In the first half of 2016, Banco de Portugal:

• Analysed information on 383,446 new proceedings under the Out-of-court Arrears Settlement Procedure 
• Analysed 4,084 advertising materials of 53 institutions 
• Monitored 682 price lists (433 fees and expenses leaflets and 249 interest rate leaflets) 
• Assessed compliance with maximum rates on 780,062 consumer credit agreements 
• Carried out 83 inspections of branches, 45 inspections of central services and 425 off-site inspections 
• Received 6,691 bank customer complaints 
• Issued 426 specific orders to correct irregularities 
• Initiated 106 administrative proceedings

Arrears regimes

While monitoring the prevention and management of arrears on credit agreements with household customers, credit institutions reported to Banco de Portugal that they had initiated a total of 383,446 proceedings under the Out-of-court Arrears Settlement Procedure (OASP), 14 per cent more than in the second half of 2015. 

Most of the proceedings initiated during this six-month period related to consumer credit agreements (84 per cent). Proceedings in this credit segment rose by 17.1 per cent from the previous six-month period, with credit cards accounting for a substantial share. The number of OASP proceedings initiated involving mortgage agreements was, however, stable from the previous period.

OASP proceedings concluded with a settlement of arrears increased overall from the second half of 2015. In OASP proceedings associated with consumer credit agreements, the number of settlements involving the payment of arrears rose by 12.5 per cent, while the number of proceedings where renegotiations resulted in an agreement between the parties increased by 31.3 per cent. 

In mortgage loans, in turn, the number of proceedings concluded with a settlement of arrears decreased (17.7 per cent), although the share of OASP proceedings concluded following the payment of arrears has remained high (62.5 per cent of the total).

Systematic monitoring

In the first half of 2016, Banco de Portugal monitored a greater number of advertising materials (4,084, i.e. 10.2 per cent more than in the first half of 2015), due to the increase in advertising on personal loans and credit cards. 

The number of information leaflets on indexed and dual deposits submitted to Banco de Portugal for prior inspection was 116 (from 12 institutions), decreasing by 18.3 per cent from the first half of 2015. In turn, the number of matured indexed and dual deposits whose returns were checked by Banco de Portugal increased by 8.9 per cent, to a total of 98.

On the basis of information reported by credit institutions, Banco de Portugal assessed their compliance with maximum rates on new consumer credit agreements, with a monthly average of approximately 130,000 agreements, 13.5 per cent more than in the first half of 2015.

Inspections

At the beginning of the first half of 2016, inspections monitored compliance with the obligation of credit institutions to send an ‘invoice-receipt’ to their customers on an annual basis, listing all fees and expenses associated with the deposit account and payment services charged in the previous year. 

In the wake of the revision of the minimum banking services regime, whereby a wider set of institutions was required to provide a minimum services account, Banco de Portugal conducted ‘mystery shopping’ actions in various branches of institutions that have recently started to provide this type of account, and checked for the appropriate disclosure of information.

The monitoring of consumer credit was also a priority for Banco de Portugal in the first half of the year. Banco de Portugal assessed whether practices followed when entering into consumer credit agreements were adequate, mainly in credits cards, overdraft facilities and overrunning. 

In the course of the first half of the year, compliance with reporting requirements was also assessed in the consumer loans statements provided by institutions to customers.

Bank customer complaints

In the first half of 2016, Banco de Portugal received 6,691 complaints on matters under the scope of the Bank’s business conduct supervision activities, with a monthly average of 1,115 complaints, having declined slightly (-0.8 per cent) compared with the monthly average in 2015.

This was due to the fact that complaints regarding deposit accounts remained relatively stable (-0.2 per cent), while complaints regarding consumer loans decreased (-5.9 per cent) and complaints regarding mortgage loans increased slightly (1.4 per cent). Special mention should be made to the reduction in the number of complaints on arrears situations.

With regard to complaints closed during the first half of 2016, 64 per cent presented no signs of breach.

Correction of irregularities and sanctions

In the scope of its monitoring activities, in the first half of 2016 Banco de Portugal issued 426 recommendations and specific orders to 68 entities and initiated 106 administrative proceedings against 27 entities.

These recommendations and specific orders followed inspections (77 per cent of total recommendations and specific orders issued), the monitoring of advertising materials (11.5 per cent) and the analysis of complaints (11.5 per cent). In the wake of inspections conducted in the first half of the year, recommendations and specific orders issued focused chiefly on consumer loan issues.

Administrative proceedings were initiated mostly following breaches detected when analysing bank customer complaints, while other proceedings resulted from monitoring activities on the basis of monthly reports on the annual percentage rate of charge applied to new consumer credit agreements and in the course of inspections. Proceedings initiated in the wake of the analysis of complaints covered 122 bank customer complaints.

Lisbon, 13 October 2016