Banco de Portugal was established by Royal Charter on 19 November 1846 as a bank of issue and commercial bank.
This came about through the merger of Banco de Lisboa, a bank of issue and commercial bank, and Companhia Confiança Nacional, an investment company that specialised in financing public debt.
The Bank was founded as a public limited company and was mostly privately owned until its nationalisation in 1974.
From its foundation until the Second World War
Until 1887, Banco de Portugal shared the right to issue banknotes with other institutions.
When the Decree of 9 July 1891 was published, the Bank became the sole issuer of banknotes for the Portuguese mainland, Azores and Madeira.
After a somewhat troubled first decade, Banco de Portugal entered a phase of dynamic growth that lasted until the First World War, and became the most important commercial bank in the country. This growth was largely due to the fact that public debt, which was persistent, could now be monetised through public loans and not by issuing money.
While Portugal was on the gold standard, that is, until 1891, one of the Bank’s main concerns was to ensure the convertibility of the banknotes it issued into metal coin.
Despite not being one of its official duties, Banco de Portugal also acted as a ‘lender of last resort’ for the banking system, either preventing or easing several crises.
Following the 1891 financial and monetary crisis and the establishment of non-convertibility of Banco de Portugal banknotes, active monetary policy ceased, and the discount rate was fixed at a level that would last until 1914. Despite this, Banco de Portugal developed its role as ‘banker to the banks’, along with its informal supervision of the sector.
In June 1931, there was a major change in the duties and statutes of the Bank. New rules were defined that limited the growth of its liabilities, linking them to the amount the Bank held in its foreign currency reserves. These rules, together with other stringent measures, limited Banco de Portugal's ability to finance the State and enabled effective monetary control. Its administrative dependence on the Government increased and the Bank became committed to pursuing a policy of fixed interest and exchange rates.
Restrictions on transactions were introduced again during and after the Second World War, which brought about a very complex system of exchange controls, covering operations in capital, goods and invisibles. The Bank took on regulatory duties in such operations, supervisory functions of the system, and started to act as a Government agent in its relationship with international monetary organisations.
There was a gradual liberalisation of trade and capital movements following the Second World War, enabled by budget surpluses that ensured the viability of a generally passive monetary policy until the mid-1970s. Banco de Portugal's functions changed substantially throughout this period, widening to cover international payments, reserve management and domestic monetary policy.
At the end of the 1950s, a legal framework was created to regulate the activity of commercial banks and other credit institutions.
Laws were approved between 1957 and 1960 that obliged banks to hold minimum cash reserves and entrusted Banco de Portugal with greater responsibilities, including more powers to intervene in credit control and setting interest rates.
From nationalisation until 1997
Following its nationalisation in September 1974, the functions and statutes of Banco de Portugal were redefined through the Organic Law published on 15 November 1975, giving it the role of a central bank and, for the first time, powers to supervise the banking system.
Due to social changes, monetary policy became more active and Banco de Portugal took on important responsibilities in terms of monetary and credit control, as well as organising and regulating the money markets, especially after Portugal joined the European Community in 1986.
As budgetary policy tightened, and there was growing integration in European markets, Banco de Portugal's functions became more similar to those performed by the other European central banks.
A new Organic Law was approved in October 1990. Its main changes included imposing constraints on the financing of public deficits and granting greater independence to the Bank’s Board of Directors.
Economic policy underwent substantial changes in 1992, reflecting the option to pursue policies seeking nominal stability.
In April of the same year, the escudo joined the Exchange Rate Mechanism of the European Monetary System.
Capital movements were completely liberalised in December, making the escudo fully convertible.
Banco de Portugal's Organic Law underwent profound changes in 1995 as part of the preparation for Economic and Monetary Union.
Price stability became the Bank’s main mission. It was granted greater autonomy in the conduct of monetary policy, and it was given more responsibilities in the area of payment systems.
Economic and Monetary Union
The Organic Law of Banco de Portugal went through major changes once again in January 1998 to reinforce its independence as a central bank, under the terms required for Portugal's participation in Stage Three of Economic and Monetary Union, and to prepare its integration in the European System of Central Banks.
On 2 May 1998, the Heads of State or Government of the European Union decided that Economic and Monetary Union would begin on 1 January 1999 with 11 participating Member States, including Portugal.
At the same time, the ministers of the Member States adopting the euro as their single currency, the governors of their central banks, the European Commission and the European Monetary Institute reached agreement on how to determine the irrevocable conversion rates for the euro.
Banco de Portugal joined the European System of Central Banks on 1 June 1998.
On 1 January 1999, following the adoption on the previous day by the Council of the European Union of the irrevocable conversion rates between the euro and the currencies of the 11 participating Member States, the third stage of Economic and Monetary Union began, and was marked by a single monetary policy and a single currency – the euro. The currencies of the 11 participating Member States, including the escudo, became national denominations of the euro.
Euro banknotes and coins were put into circulation on 1 January 2002. Banco de Portugal had a preeminent role in the physical introduction of the euro in Portugal, including in the accompanying information campaign.
From financial crisis to Banking Union
The international financial crisis that began in 2008 exposed a number of vulnerabilities in the architecture of Economic and Monetary Union. The legislation passed to rectify these shortcomings once again resulted in great changes to Banco de Portugal's responsibilities.
In 2012, the Bank was granted powers to intervene in supervised institutions in situations of structural financial imbalance, with a view to maintaining financial stability.
As part of the conclusions of the European Council and the Euro Area Summit Statement in June 2012, the European Commission presented a package of legislative proposals to create a Single Supervisory Mechanism, formed of the European Central Bank and national banking supervisors. This mechanism would be the first step to creating a Banking Union in Europe to ensure the consistent application of banking system rules, thus reinforcing Economic and Monetary Union.
To safeguard Banco de Portugal's participation in the new Single Supervisory Mechanism, the Organic Law was amended again in 2013. The Bank was simultaneously designated Portuguese macroprudential authority and became formally responsible for identifying, monitoring and assessing risks to financial stability and for adopting corresponding preventive and mitigation measures.
With the entry into force of the Single Supervisory Mechanism, the first pillar of the Banking Union, in November 2014, the Bank began to exercise its banking supervision competencies in a shared model with the European Central Bank and the other national competent authorities.
The second pillar of Banking Union, the Single Resolution Mechanism, entered into force in 2016. Banco de Portugal's resolution responsibilities then started to be exercised within the framework of this mechanism.
Banco de Portugal's corporate identity was adopted in 2014 and results from a reinterpretation of the Bank's original logo from 1846.
This reinterpretation aimed to simplify the Bank's image, reflecting the strategic guideline of openness to society. The logo's central motif continued to be the female figure created by painter Domingos Sequeira for Banco de Lisboa. This figure, identified as the most distinctive item of the original seal, was reinterpreted, simplified and reduced to a plain silhouette. Among the different allegorical features of the old seal, only the caduceus and shield were maintained. Contrary to its position in the original seal, the female figure is facing forward, evoking modernity and the future. The image was vectorised and made simpler, circular, and interrupted, in an allusion to a coin (the original seal was oval). The colours selected for the Bank's new logo were black and ochre/gold. The typeface is more more up-to-date, affirmative and legible: the 'Stella' font by Portuguese designer Mário Feliciano was chosen.
The original seal of Banco de Portugal and the evolution of the logo
In 1846, Banco de Portugal adopted, with slight changes, the seal that painter Domingos Sequeira had created for Banco de Lisboa.
The design reflects the classical universe of the time and contains a large variety of allegorical items alluding to fiduciary wealth, financial health and prudence, the Discoveries and trade.
Oval in shape, the seal depicts a goddess, resting upon a shield with reference to the Royal Charter that created Banco de Portugal.
The goddess is clad in long clothes and Greek sandals and wears a caravel-shaped diadem. Her right arm stretches towards the horizon. On her left arm, she holds a caduceus entwined with two serpents and an eagle, symbolising financial wealth and prudence and royal power.
The goddess is surrounded by a cornucopia of coins (symbolising fiduciary wealth), an anchor, the sea and a ship (allusive of the Discoveries and trade), and the sun, beneath the words 'Banco de Portugal'.