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Application for authorisation: Credit institution

1. Application

In order to carry on banking business, i.e. taking deposits or other repayable funds from the public and granting credit for their own account, applicants shall submit to Banco de Portugal an application for an authorisation to take up the business of a credit institution to be established in Portugal , which will then notify the European Central Bank (ECB).

The ECB shall be exclusively competent for authorising the setting up of credit institutions in Member States taking part in the Single Supervisory Mechanism (SSM).

  1. The application shall be submitted to the national competent authorities (NCAs), in compliance with the requirements established in the applicable national law;
  2. Where the applicant complies with all the authorisation requirements provided for in national law, the NCA shall prepare, within the deadline set out in national law and in Regulation (EU) No 468/2014 of the European Central Bank of 16 April 2014 (SSM Framework Regulation), a draft decision proposing that the ECB grants the applicant authorisation to take up the business of a credit institution. The draft decision shall be notified by the NCA to the ECB and to the applicant at least 20 working days before the end of the maximum assessment period provided for in the applicable national law. The NCA shall reject applications that do not comply with the authorisation conditions laid down in the applicable national law and send a copy of its decision to the ECB;
  3. The draft decision shall be deemed to be adopted by the ECB, unless the latter objects within a maximum period of ten working days, extendable once for the same period in duly justified cases. The ECB can only raise objections to the draft decision if the application conditions established in the applicable EU law have not been met. The ECB shall state the reasons for the rejection in writing;
  4. The ECB’s decision shall be notified by Banco de Portugal to the applicant.

Type of legal act: Authorisation or non-authorisation decision

Competent authority: The ECB, based on a proposal of Banco de Portugal

2. Applicable Regulations

Decision by the ECB regarding applications submitted to it shall be adopted in compliance with European Union (EU) law and other national law applicable in the Member State where the applicant wishes to establish the credit institution.

European Union law:

National law:

Type of credit institution

Activities

Legal acts

Bank

All banking operations listed in Article 4 of the Legal Framework

Legal Framework

Savings bank

All banking operations listed in Article 4 of the Legal Framework

Decree-Law No 190/2015 of 10 September 2015; Legal Framework

Affiliated savings banks

  • taking deposits and other repayable funds;
  • granting loans secured by lien or mortgage;
  • acquiring and holding public debt securities of euro area Member States;
  • obtaining funding from other credit institutions;
  • providing services of collection, cash transfer, safe deposit box rental, real estate management, regular payment and other similar services;
  • • conducting foreign exchange transactions

Decree-Law No 190/2015 of 10 September 2015

Central Mutual Agricultural Credit Bank

  • taking deposits and other repayable funds;
  • financing mutual agricultural credit banks that are members of the Central Mutual Agricultural Credit Bank;
  • lending;
  • participating in bond issuance;
  • issuing electronic money
  • providing transfer of funds, safe deposit box rental, custody, depositary and investment fund management services, in similar terms as banks;
  • celebrating agency agreements with mutual agricultural credit banks that are members of the Central Mutual Agricultural Credit Bank, provided that their activity is limited to their intervention area.

Decree-Law No 24/1991 of 11 January 1991 (republished by Decree-Law No 142/2009 of 16 June 2009)

Mutual agricultural credit banks

  • taking deposits and other repayable funds;
  • engaging in agricultural credit operations in favour of members;
  • providing safe deposit box rental and custody services;
  • real-estate management;
  • insurance mediation;
  • credit reference services;
  • intermediation in payments and other similar activities;
  • placement of securities, provided that it does not imply a link to the subscription of any tranche not underwritten by the public;
  • purchasing and selling foreign banknotes and coins or travellers’ cheques, as permitted to exchange offices;
  • mutual agricultural credit banks that meet the appropriate structural conditions and adequate resources may be authorised by Banco de Portugal to carry out other operations, such as:
  1. financial leasing;
  2. factoring;
  3. issuing and managing means of payment, among which credit cards, travellers’ cheques and letters of credit;
  4. participation in securities’ issues and placement and provision of related services;
  5. money broking;
  6. securities portfolios consulting services, safekeeping, management and administration;
  7. portfolio management and consulting services in relation to other assets.

Decree-Law No 24/1991 of 11 January 1991 (republished by Decree-Law No 142/2009 of 16 June 2009)

Credit financial institution

Carrying out transactions allowed to banks, except the taking of deposits

Decree-Law No 186/2002 of 21 August 2002

Mortgage credit institution

  • granting, acquisition and disposal of mortgage-backed claims on real estate, with a view to issuing covered bonds;
  • granting, acquisition and disposal of claims on central or regional and local authorities of an EU Member State and claims carrying explicit and legally binding guarantee granted by the same entities, with a view to issuing public sector-backed bonds;
  • in addition, mortgage credit institutions may also:
  1. administer the assets received as repayment of the credits;
  2. carry on all the accessory activities necessary to pursue their purpose.

Decree-Law No 59/2006 of 20 March 2006

3. Requirements

Within the scope of an application for authorisation to take up the business of a credit institution, Banco de Portugal and the ECB shall check whether the following general requirements listed in Article 14 of the Legal Framework are complied with:

  • correspond to one of the corporate types provided for in Portuguese law;
  • take the form of a public limited company (sociedade anónima), with the exception of mutual agricultural credit banks and affiliated savings banks (Article 29 of the Legal Framework);
  • have as their sole corporate purpose the activities legally permitted under the law;
  • have an initial capital not lower than the legal minimum capital, represented by nominal shares, with the exception of mutual agricultural credit banks and affiliated savings banks (Article 29 of the Legal Framework);
  • have their head office and effective management in Portugal;
  • have robust governance arrangements in place;
  • have effective processes in place to identify, manage, monitor and report risks;
  • have adequate internal control mechanisms in place;
  • have remuneration policies and practices in place promoting and consistent with sound and prudent risk management;
  • have management and supervisory bodies composed of members whose reputation, professional qualification, independence and availability, at an individual level or at the level of the bodies as a whole, provide guarantees of sound and prudent management.

 

4. Procedures

The authorisation procedures to take up the business of a credit institution comprise two stages:

1st Stage – Licencing /authorisation

The application for authorisation to take up the business of a credit institution shall be submitted to Banco de Portugal, and shall be accompanied by the following elements:

  • Application procedure 
Elements listed in Art 17 of the Legal Framework
  • characterisation of the type of credit institution to be set up; 
  • draft of the articles of association;
  • programme of operations, including the type of operations to be carried out, geographical location, internal organisation, material, technical and human resources to be used and prospective accounts for each of the first three business years; 
  • identity of the founding shareholders, indicating the amount of capital subscribed by each of them; 
  • reasoned explanation of the adequacy of the shareholder structure for the stability of the credit institution; 
  • statement of commitment to the effect that on the date of setting-up and as a prerequisite of the same, the amount of the capital stock required by law will be deposited with a credit institution; 
  • robust corporate governance arrangements; 
  • identification of the members of the management and supervisory bodies, accompanied by a justification from the applicants of their suitability to ensure the sound and prudent management of the credit institution; 
  • in the case of founding members who are legal persons with qualifying holdings in the credit institution to be set up, the application shall be further accompanied by the following information on those founding members:
    1. articles of association or by-laws;
    2. list of the members of the management body;
    3. balance sheet and accounts for the last three years;
    4. list of the shareholders who have a qualifying holding therein;
    5. list of the undertakings in which the legal person in question has a qualifying holding;
    6. explanatory memorandum of the structure of the group.
Other elements
  • information confirming compliance with the general requirements listed in Article 14 of the Legal Framework; 
  • certificate authorising the trade name or company name and provisional corporate number (NIPC) issued by the National Registry of Companies (RNPC);
  • provisional information for each of the first three business years regarding own funds and compliance with applicable ratios and prudential limits; 
  • the underlying assumptions of the prospective accounts for each of the first three business years;
  • the information referred to in Notice of Banco de Portugal No 5/2008, regarding the internal control systems of supervised entities; 
  • the information referred to in Notice of Banco de Portugal No 5/2010 regarding the proposed shareholders/partners (both legal and natural persons) of the credit institution, including detailed information on the financial resources used for the setting up of the credit institution and their source (broken down by shareholder/partner), as well as on the means and network/circuit used for the transfer of funds to the project/to the credit institution in which initial capital required by law has been deposited, with information on the respective source and country/jurisdiction of origin;
  • information on the possible compliance with (some of) the assumption(s) listed in Article 13-A (1) of the Legal Framework, in the calculation of qualifying holdings on the credit institution to be set up;
  • identification of the beneficial owner(s), pursuant to Article 2 (1) (h) of Law No 83/2017 of 18 August 2017, regarding: 
    1. the institution to be set up;
    2. the legal persons holding share capital in the institution to be set up.
  • estimated number of employees (‘colaboradores’) and relevant employees(‘colaboradores relevantes’), pursuant to Article 2 (5) and (6) of Notice of Banco de Portugal No 5/2013;
  • detailed information on the following (Article 4 (5) of Notice of Banco de Portugal No 5/2013):
    1. the inherent risks to the specific activity that the credit institution intends to carry out as well as the method used to identify and evaluate those risks;
    2. the means and control procedures to be put in place and their suitability for mitigation of the identified risks;
    3. how the credit institution will monitor the adequacy and effectiveness of the means and control procedures to be put in place.
  • detailed information on the policies, means and procedures integrating the institution’s internal control system with respect to the prevention of money laundering/terrorist financing (MLTF), including its customer acceptance policy;
  • detailed information on human, financial, material and technical resources to be allocated to the prevention of MLTF;
  • draft contracts of services to be provided by third parties, including accounting services; 
  • statement by a specialised entity of good repute, ensuring the sufficiency and adequacy of IT tools to the requirements of the credit institution to be set up, namely as regards the provision of information to supervisory authorities.

Banco de Portugal may request additional information to the applicants and make all the inquiries deemed necessary (Article 17 (6) of the Legal Framework).

 

  • Assessment of the application

After receiving the application, Banco de Portugal assesses whether the applicant complies with all the authorisation conditions laid down in the applicable national law. Banco de Portugal shall reject applications that do not comply with said conditions, in particular when any of the situations described in Article 20 (1) of the Legal Framework occurs, sending a copy of its decision to the ECB.

If Banco de Portugal considers that the application complies with all authorisation conditions laid down in the applicable national law, it prepares a draft decision proposing that the ECB grants the applicant authorisation to take up the business of a credit institution.

The ECB assesses the application based on the authorisation conditions laid down in the applicable EU law. If it considers that these conditions are not met, the ECB offers the applicant the opportunity to comment in writing on the pertinent facts and objections relevant to the assessment. 

 

  • ECB decision

The ECB adopts a decision to grant or refuse the authorisation.

The decision to grant the authorisation shall be notified to the applicants within six months of the receipt of the complete application, or, where applicable, of receipt of the additional information required from the applicants, but in any case within twelve months from the receipt of the initial application. Non-notification of the decision within the above-mentioned periods shall imply tacit refusal of the application (Article 19 of the Legal Framework). 

The decision to grant the authorisation allows the applicants to set up a credit institution. The institution in question, however, may not commence its activity without being subject to a special registration with Banco de Portugal, pursuant to Article 65 of the Legal Framework. 

The authorisation does not require the applicants to set up a credit institution and lapses if the institution fails to commence its activity within a period of twelve months following the authorisation. Banco de Portugal may, upon request of the applicants, extend the time limit laid down for the commencement of activity for another period of twelve months (Article 21 of the Legal Framework). 

 

2nd Stage – Special registration

After being granted an authorisation to set up a credit institution, and prior to its special registration with Banco de Portugal, the applicants implement the means and conditions to carry out the authorised activity. 

Registration will be refused, in particular, when it is demonstrated that any of the conditions for the authorisation necessary for the setting-up of the credit institution or for the pursuit of its activity is not met, pursuant to Article 72 of the Legal Framework.

Once the applicants consider that the credit institution meets all the conditions to commence its activity, they request Banco de Portugal to check, at the premises of the institution, if the minimum legal and operational requirements necessary for the carrying out of the authorised activity are met, and if the conditions mentioned in the project submitted to Banco de Portugal and authorised by the ECB are met. 

After obtaining a favourable opinion from Banco de Portugal regarding the means and conditions to commence their activity, the applicants may request the special registration of the credit institution with Banco de Portugal. 

The registration of the credit institution covers the items listed in Article 66 of the Legal Framework.

After the respective registration, the credit institution may commence its activity.  

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