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Application for authorisation: Financial company

In accordance with Article 16 of the Legal Framework of Credit Institutions and Financial Companies (Regime Geral das Instituições de Crédito e Sociedades Financeiras – RGICSF), applicable to financial companies and investment firms by reference under Articles 174-A and 199-C of the RGICSF, the setting-up of a financial company depends on an authorisation granted by Banco de Portugal, on a case-by-case basis.

 

What is a financial company?

In accordance with the definition provided for in Article 2 A(kk) of the  Legal Framework of Credit Institutions and Financial Companies (Regime Geral das Instituições de Crédito e Sociedades Financeiras – RGICSF), financial companies are companies, whose principal activity is to carry out one or more of the activities that banks are authorised to conduct, except accepting deposits or other repayable funds from the public.

This definition does not apply to:

  • credit institutions;
  • holding companies subject to supervision by Banco de Portugal, under Article 117 of the RGICSF;
  • payment institutions and electronic money institutions, under Decree-Law No 91/2018 of 12 November 2018;
  • investment fund management companies and credit securitisation fund management companies, under Decree-Law No 144/2019 of 23 September 2019.  

 

Types of financial company

The Legal Framework of Credit Institutions and Financial Companies (Regime Geral das Instituições de Crédito e Sociedades Financeiras – RGICSF) provides definitions of the following types of financial company:

 

Financial companies may only carry out the operations permitted by the laws and regulations governing their activity (Article 7 of the RGICSF), namely as described in the table below. 

Type of financial company

Activities

Legal framework

Dealer

  • Reception and transmission of orders in relation to one or more financial instruments
  • Execution of orders on behalf of third parties
  • Management of portfolios belonging to third parties
  • Placement in public distribution offers
  • Registration and deposit of securities
  • Credit granting, including the loan of securities, for securities-trading operations with the involvement of the dealer
  • Advice on transferable securities investment, advice on the capital structure, industrial strategy and related issues, as well as on the merger and acquisition of corporations
  • Assistance in public offer of securities
  • Foreign exchange and safety deposit box rental service related to the provision of investment services

Decree-Law No 262/2001 of 28 December 2001

Broker

  • Reception and transmission of orders in relation to one or more financial instruments
  • Execution of orders on behalf of third parties
  • Management of portfolios belonging to third parties
  • Placement in public distribution offers, without underwriting
  • Registration and deposit of securities
  • Advice on transferable securities investment

Decree-Law No 262/2001 of 28 December 2001

Wealth management company

  • Management of portfolios belonging to third parties
  • Investment advice

Decree-Law No 163/94 of 4 June 1994

Foreign exchange or money market mediating company

  • Foreign exchange or money market intermediation operations
  • Provision of related services

Decree-Law No 110/94 of 28 April 1994

Credit financial company

  • Carrying out of operations authorised to banks, except taking deposits and other repayable funds from the public and the provision of payment services and issuance of electronic money

Decree-Law No 100/2015 of 2 June 2015

Investment firm

  • Financial operations
  • Provision of related services as referred to in Article 3 of the legal framework governing investment firms

Decree-Law No 260/94 of 22 October 1994

Financial leasing company

  • Financial leasing activities
  • On an ancillary basis, possibly also sale, assignment of operation, leasing or other management acts over reinstated assets, and leasing of movable property under conditions other than those described above

Decree-Law No 72/95 of 15 April 1995

Factoring company

  • Acquisition of short-term credit, resulting from proceeds of the sale of products or the provision of services in both the internal and external markets

Decree-Law No 171/95 of 18 July 1995

Mutual guarantee company

  • Financial operations
  • Provision of related services to the benefit of micro, small and medium-sized enterprises
  • Financial operations and provision of related services to the benefit of other legal and natural persons, especially students and researchers

Decree-Law No 211/98 of 16 July 1998

Regional development company

  • Promotion of productive investment in the relevant region and support of its economic and social development

Decree-Law No 25/91 of 11 January 1991

Exchange office

  • Purchase and sale of foreign banknotes and coins or travellers’ cheques
  • On an ancillary basis, possibly also purchase of gold and silver, as well as coins for numismatics purposes
  • In addition, pursuit of activities as agent of a payment institution or electronic money institution having its head office in Portugal or in another EU Member State, under the conditions set out in the Legal Framework for Payment Services and Electronic Money (Regime Jurídico dos Serviços de Pagamento e da Moeda Eletrónica – RJSPME)

Decree-Law No 3/94 of 11 January 1991

Microcredit financial company

  • Granting of small amounts of credit to households and firms intending to engage in an economic activity
  • Advice to borrowers and monitoring of funded projects

Decree-Law No 12/2010 of 19 February 2010

 

Legal framework governing the setting-up of financial companies

Legal Framework of Credit Institutions and Financial Companies

It regulates the access to the activity of financial companies and the exercise of their supervision, as well as the supervisory powers and tools.

Notice of Banco de Portugal No 5/2008

 

It provides that financial corporations must have an internal control system to ensure:

- efficient and cost-effective performance of the activity;

- the existence of complete, reliable, relevant and timely financial and management information; 

- compliance with the applicable legal and regulatory provisions.

Notice of Banco de Portugal No 5/2010

 

It determines which information should accompany communications of acquisition of or increase in qualifying holdings in financial corporations.

Instruction of Banco de Portugal No 23/2018

 

It determines which elements the institutions must submit together with the authorisation request for the exercise of functions of the members of the management and supervisory bodies.

Executive Order No 95/94

It sets the minimum share capital of financial companies.

Law No 83/2017

 

It sets forth anti-money laundering and counter terrorist financing measures

Notice of Banco de Portugal No 2/2018

It governs the conditions of application, procedures, instruments, mechanisms, enforcement measures, reporting obligations and other aspects necessary for ensuring compliance with obligations for the prevention of money laundering and terrorist financing, within the activities of financial entities subject to Banco de Portugal’s supervision.

 

Requirements for setting-up a financial company

In the context of an application for authorisation to set up a financial company, Banco de Portugal checks whether the submitted proposal meets the general requirements imposed by law.

These requirements are listed in Article 14 of the RGICSF, with any necessary adaptation under Article 174-A (other financial companies) and 199-C (investment firms) of the RGICSF, and according to which financial companies must: 

  • correspond to one of the types provided for in Portuguese law;
  • have as their sole purpose the activities legally permitted by law;
  • have a share capital not lower than the legal minimum capital (Executive Order No 95/94 of 9 February 1994) and, in the case of investment firms that take the legal form of sociedades anónimas (public limited companies), to be represented by nominal shares;
  • 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.

 

Stages for authorising the setting-up of a financial company

1. Authorisation

1.1 Supporting information of the application

The application for authorising the setting-up of a financial company must be submitted to Banco de Portugal and, in general, include the elements listed below. 

Elements listed in Article 17 of the RGICSF, applicable by reference under Article 174-A (other financial companies) and 199-C (investment firms) of the RGICSF: 

  • characterisation of the type of financial company to be set up; 
  • draft of the articles of association; 
  • programme of operations, including the types of operations to be carried out; 
  • geographical location; 
  • description of the internal organisation; 
  • description of material, technical and human resources to be used;
  • prospective accounts for each of the first three business years; 
  • identity of the direct and indirect shareholders, whether natural or legal persons, indicating the amount of capital subscribed by each of them; 
  • reasoned explanation on the adequacy for the shareholder structure to the stability of the financial company;
  • statement of commitment to the effect that on the date of setting-up and as a prerequisite of the same, the amount of share capital required by law has been deposited with a credit institution; 
  • robust corporate governance arrangements; 
  • identity 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 institution; 
  • in the case of direct or indirect founding members who are legal persons with qualifying holdings in the financial company to be set up, the application must also include 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 with a qualifying holding;
  5. list of the undertakings in which the relevant legal person has a qualifying holding;
  6. explanatory memorandum of the structure of the group.

 

Elements complementary to those listed in Article 17 of the RGICSF:

  • assumptions underlying the prospective accounts under Article 17(b) of the RGICSF;
  • estimates on capital adequacy and compliance with the applicable ratios and prudential limits for the first three business years;
  • statement by a specialised entity of good repute, ensuring the sufficiency and adequacy of IT tools to the needs of the institution to be set up, namely as regards the provision of information to supervisory authorities;
  • identification of outsourced functions/services. Where applicable, the applicant must send the following information:
  1. the relevant outsourcing policy;
  2. indication of a person responsible for the outsourcing contracts;
  3. identification of the type of the outsourced function;
  4. drafts of outsourcing contracts. According to Circular Letter of Banco de Portugal No CC/2019/00000065, as of 31 May 2020 investment firms subject to Banco de Portugal’s supervision must comply with the requirements set forth in the “Guidelines on outsourcing arrangements” (EBA/GL/2019/02); 
  • a copy of the certificate authorising the trade name or company name issued by the Registo Nacional de Pessoas Coletivas (RNPC, Portuguese register of companies) or the access code to the online extract of the company register (Certidão Permanente);
  • the elements referred to in Notice of Banco de Portugal No 5/2010 regarding the proposed shareholders/partners, including information on the financial resources used and their source, as well as on the means and network used for the transfer of funds to the project, with information on the respective source and country/jurisdiction of origin;
  • identity of the beneficial owners, within the meaning under Article 2(h) of Law No 83/2017, and of the legal persons holding share capital in the financial company to be set up;
  • information on possible compliance with some of the assumption(s) listed in Article 13-A(1) of the RGICSF, in the calculation of qualifying holdings;
  • questionnaires, duly completed by the proposed members of the corporate bodies of the financial company to be set up, on professional qualification, suitability and availability, sent under Instruction of Banco de Portugal No 23/2018, with a view to assessing the suitability under Articles 30 to 33-A of the RGICSF; 
  • internal control manual reflecting the proposed internal governance model, including the allocation of responsibilities to the members of management bodies, the policy to prevent conflicts of interest and the internal control mechanisms in place, particularly, internal control and operational models for risk management, compliance and internal audit functions that are appropriate and proportionate to the activity to be pursued and compliant with the legal requirements set forth in Notice of Banco de Portugal No 5/2008;
  • the business continuity plan (including reference to outsourced services, if applicable);
  • the recovery plan, in accordance with Article 116-D of the RGICSF, applicable to investment firms by reference under Article 199-I(2) of the RGICSF, and Notice of Banco de Portugal No 3/2015;
  • in the field of the prevention of money laundering and terrorist financing (ML/TF), the applicable regulatory framework must be taken into account, particularly the provisions of Law No 83/2017 and Notice of Banco de Portugal No 2/2018, which governs the conditions, mechanisms and procedures that are necessary for effective compliance with the ML/TF preventive obligations in the provision of financial services subject to Banco de Portugal’s supervision;
  • information confirming compliance with the general requirements listed in Article 14 of the RGICSF; 
  • estimated internal staff number, within the meaning under Article 2(1)(e) of Notice of Banco de Portugal No 2/2018;
  • estimated internal relevant staff number, within the meaning under Article 2(1)(f) of Notice of Banco de Portugal No 2/2018
  • detailed information on (Notice of Banco de Portugal No 2/2018):
  1. risks inherent in the specific activity that the institution intends to pursue;
  2. the control means and procedures to be put in place and their suitability to mitigate the identified risks;
  3. how the institution intends to monitor the suitability and effectiveness of the control means and procedures to be put in place;
  • detailed information on the policies, means and procedures incorporated in the institution’s internal control system for the prevention of ML/TF, including the customer acceptance policy;
  • detailed information on human, financial, material and technical resources to be allocated to the prevention of ML/TF.

 

1.2 Submission of the application

The application, including all supporting information above, may be submitted in physical or electronic form.

  • Physical form 
    Banco de Portugal, Prudential Supervision Department, Authorisations Unit
    R. Francisco Ribeiro, 2 
    1150-165 Lisbon
  • Electronic form (recommended) 
    dsp.registos.expediente@bportugal.pt

 

1.3 Assessment of the application

Banco de Portugal validates the completeness of the received information for the analysis of the application procedure. 

If Banco de Portugal considers that the application does not meet all legal requirements, Banco de Portugal notifies the applicants and allow them reasonable time to remedy any inadequacy, before refusing to grant authorisation.

Banco de Portugal assesses all information submitted and may request clarifications and additional elements which it considers relevant to render a decision.

 

1.4 Decision

Banco de Portugal may also take one of the following decisions: 

  • Refusal of authorisation 
    Banco de Portugal refuses authorisation, notably in any of the situations described in Article 20(1) of the RGICSF.
  • Granting of authorisations 
    The decision granting authorisation allows the applicants to set up a financial company, which, however, may not commence its activities without being subject to special registration with Banco de Portugal.

 

The authorisation does not impose on the applicants any obligation to set up a financial company and lapses if the entity fails to commence its activity within a period of twelve months following the authorisation. Banco de Portugal may, upon request of the applicants, extend this time limit for the commencement of activity for another period of twelve months.

 

2. Special registration with Banco de Portugal

2.1 Prior and on-site verification of compliance with the legal and operational requirements for the commencement of activity

Upon being granted authorisation by Banco de Portugal for setting-up a financial company and once the applicants consider that the company meets all the conditions to commence its activity, they request Banco de Portugal to verify, at the premises of the entity, whether the minimum legal and operational requirements necessary for the carrying out of the authorised activity are met, and whether the conditions mentioned in the project submitted to and authorised by Banco de Portugal are met. 

 

2.2 Decision on registration

After obtaining a favourable opinion from Banco de Portugal regarding the means and conditions to commence their activity, the applicants may request special registration of the financial company with Banco de Portugal, under Articles 65 to 72 of the RGICSF, applicable by virtue of Article 194(2) of the RGICSF. 

Registration of the financial company covers the items listed in Article 66 of the RGICSF. 

Registration will be refused, particularly when it is demonstrated that any of the conditions for authorisation necessary for the setting-up or for the pursuit of the activity are not met.

After registration, the financial company may commence its activity.  

 

Financial companies providing financial intermediation services

In addition, these companies must also register with the Comissão do Mercado de Valores Imobiliários (CMVM, Portuguese Securities Market Commission). 

 

Reporting obligations of financial companies

After the setting-up, financial companies must report to Banco de Portugal the information described in the legislation/regulations in force (see Reporting obligations of supervised institutions). 

 

Clarifications

Banco de Portugal is prepared to clarify any specific question regarding a project to set up an investment company or financial company, which is submitted to Banco de Portugal in advance. 

All questions submitted to Banco de Portugal must be properly presented with a highly specific factual basis and be well-reasoned, in order to allow for an adequate analysis of such questions.

 

Related FAQs:

Does Banco de Portugal charge any fee as part of a financial company authorisation procedure?

Banco de Portugal does not charge any type of fee as part of a financial company authorisation procedure.

In which languages can the application for authorisation be submitted? 

In Portuguese or English.

What needs to be done in case of changes to the information initially sent to Banco de Portugal during the authorisation application procedure?

If, during the authorisation application procedure, there is any change to the initial information included in the application (supervening fact), such change must be communicated to Banco de Portugal as soon as possible.

What can I do to expedite the authorisation procedure?

A decision rendered in a shorter period will depend on the high quality, adequacy and completeness of the information accompanying the application for authorisation and on any inquiry deemed necessary, in accordance with Article 17(6) of the RGICSF.

Should the application for authorisation have as reference an unincorporated commercial company or may it refer to an already incorporated commercial company?

If the application for authorisation refers to an already incorporated commercial company, this company may not include in its company or business name and purpose any expression which suggests an activity pertaining to the institutions subject to authorisation by Banco de Portugal until the relevant authorisation has been obtained.

Under Article 11 of the RGICSF, only undertakings authorised as financial companies may include in their company or business name or use in their activity expressions which suggest an activity pertaining to financial companies.

May Banco de Portugal make the information contained in the authorisation procedure publicly available? 

Banco de Portugal is subject to the duty of professional secrecy under Article 80 of the RGICSF.  

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