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Frequently Asked Questions – Brexit

 

Rules on authorisations to carry out financial activities in Portugal

Banco de Portugal has developed a set of answers to frequently asked questions (FAQs) for entities that carry out, or intend to carry out, activities in Portugal subject to authorisation from Banco de Portugal. These entities include credit institutions, investment firms, payment institutions and electronic money institutions. Currently, there is a number of these entities with head office in the United Kingdom and operating in Portugal through branches or under the freedom to provide services, and whose operations may indeed become affected by the United Kingdom’s withdrawal from the European Union. Payment institutions and electronic money institutions can still operate in Portugal through the use of agents or electronic money distributors.

The UK’s withdrawal from the EU means that entities with their head offices in that Member State will no longer have free access to the EU market (establishment of branches and freedom to provide services, and as well via networks of agents or electronic money distributors), as the UK became a third country for the EU from that moment onwards. However, the existence of a transition period has led to an extension of the rules currently governing access to the market and to pursue business until at least 31 December 2020, as referred to below.

 

These FAQs are no substitute for consulting the relevant legal texts in force.

 

1. Will institutions with head office in the UK be able to continue to provide financial services in Portugal following the UK’s withdrawal from the EU?

2. For institutions with head office in the UK that wish to continue operating in Portugal after the transition period, and whose activities are supervised by Banco de Portugal, are applications for authorisation automatic?


1. Will institutions with head office in the UK be able to continue to provide financial services in Portugal following the UK’s withdrawal from the EU?

The current rules on market access will remain temporarily in force given the existence of a formally approved and ratified deal between the EU and the UK, establishing a transition period until 31 December 2020. This arrangement may be prolonged for 1 or 2 years, subject to an agreement reached between the EU and UK before 1 July 2020.

However, once the transition period ends, EU law will cease to apply to the UK and institutions with head office in the UK will be considered third country entities and the rules described below will be applicable.

Institutions with head office in the UK with a subsidiary in the European Economic Area (EEA, comprising EU Member States, Norway, Iceland and Liechtenstein), may, via this subsidiary, exercise the right of establishment and the freedom to provide services to carry out activities and provide financial services in Portugal (after notifying the supervisory authority of the country where the subsidiary is established of the intention to carry out activities in Portugal).

 

2. For institutions with head office in the UK that wish to continue operating in Portugal after the transition period, and whose activities are supervised by Banco de Portugal, are applications for authorisation automatic?

No. Entities that wish to continue to operate in Portugal, including by pursuing a new regulated activity (with new contracts being concluded with customers), must submit their applications for authorisation to Banco de Portugal, as described below, paying particular attention to the rules relating to time limits.

 

Credit institutions

Credit institutions with head office in a third country that wish to pursue business in Portugal may:

  • Set up a subsidiary. In this case, the credit institution must submit an application for authorisation and registration with Banco de Portugal, along with the items listed in Article 17 of the RGICSF. The credit institution authorisation process lasts for six months from the date when Banco de Portugal receives all evidence and information necessary for a proper examination of the application, and up to 12 months of the initial application. Although the application must be submitted to Banco de Portugal, the European Central Bank is the competent authority to grant authorisations to credit institutions, under the remit of the Single Supervisory Mechanism.
  • Establish a branch, under the “European passport scheme”, in case there is already a subsidiary in an EU Member State or in an EEA member country. If a credit institution with head office in a third country has a subsidiary in an EU Member State or an EEA member country, it may send to the competent authorities of the subsidiary's home Member State a branch passport notification, via the aforementioned subsidiary. Unless the competent authorities of the home Member State have reasons to doubt the adequacy of the administrative structure or the financial situation of the credit institution, taking into account the activities envisaged, authorities must, within three months of receiving the information sent by the credit institution, communicate it to Banco de Portugal. Before the branch of a credit institution starts any activity, Banco de Portugal must, within two months of receiving that information from the competent authorities of the home Member State, prepare for the supervision of the credit institution, after which it shall inform the credit institution that the latter may establish the branch, and if necessary it will indicate the conditions in which, in the interest of the general good, the branch shall carry out its activity in Portugal.
  • Pursue business under the freedom to provide services, in case there is already a subsidiary in an EU Member State or in an EEA member country. If a credit institution with head office in a third country has a subsidiary in an EU Member State or in an EEA member country, it may send a notification of intent to pursue business in Portugal, under the freedom to provide services, to the competent authorities of the subsidiary’s home Member State. The competent authorities of the home Member State must communicate the information submitted by the credit institution to Banco de Portugal, within one month of receipt of this information.
  • Establish a branch. For the establishment of a branch of a third country credit institution, the supervisory authority of the said third country must send to Banco de Portugal a communication (accompanied by the application for authorisation) setting out all the items listed in Article 17(3), Article 49 and Article 58(2) of the RGICSF. Articles 45, 54, 57(2), and 59 of the aforementioned RGICSF are also relevant for the pursuit of business by third country branches in Portugal. The branch authorisation process lasts for six months from the date when Banco de Portugal receives all evidence and information necessary for a proper examination of the application, and up to 12 months of the initial application

 

Investment firms

Investment firms with head office in a third country that wish to pursue business in Portugal may:

  • Set up a subsidiary. To this end, the investment firm must submit an application for authorisation and registration with Banco de Portugal, along with the items listed in Article 17 of RGICSF, with due note to Article 199-C of RGICSF. The investment firm authorisation process lasts for six months from the date when Banco de Portugal receives all evidence and information necessary for a proper examination of the application, and up to 12 months of the initial application.
  • Establish a branch, under the “European passport scheme”, in case there is already a subsidiary in an EU Member State or in an EEA member country. If an investment firm with head office in a third country has a subsidiary in an EU Member State or an EEA member country, it may send to the competent authorities of the subsidiary's home Member State a branch passport notification via the aforementioned subsidiary, setting out the items listed in Article 49(1) of RGICSF, other than those provided for in subparagraphs (d), (e) and (f), subject to Article 199-E of RGICSF. The competent authorities of the subsidiary’s home Member State must submit a passport notification to the Portuguese Securities Market Commission (Comissão do Mercado de Valores Mobiliários – CMVM).
  • Pursue business under the freedom to provide services, in case there is already a subsidiary in an EU Member State or in an EEA member country. If an investment firm with head office in a third country has a subsidiary in an EU Member State or in an EEA member country, it may send a notification of intent to pursue business in Portugal, under the freedom to provide services, to the competent authorities of the subsidiary’s home Member State, via the aforementioned subsidiary, which must then submit the notification to the CMVM.
  • Provide services at the exclusive initiative of the customer. The authorisation requirement referred to in Article 199-FB of RGICSF will not apply to third country investment firms that provide services due to the exclusive initiative of the customer, whether these are professional or retail customers, within the meaning of the Portuguese Securities Code (Article 199-FD of RGICSF). The restrictions provided for by Article 199-FD of the RGICSF must be fully complied with.
  • Establish a branch. For the establishment of a branch of a third country investment firm, the home country’s supervisory authority must send a communication setting out all the items listed in Article 199-FB(4), Article 58(2) and Article 49 of RGICSF to Banco de Portugal. The conditions set out in Article 199-FA of RGICSF must also be met. The branch authorisation process lasts for six months from the date when Banco de Portugal receives all necessary evidence and information for a proper examination of the application.

 

Payment institutions and electronic money institutions

Payment institutions and electronic money institutions with head office in a third country that wish to pursue business in Portugal may:

  • Set up a subsidiary. To this end, the investment firm must submit an application for authorisation and registration with Banco de Portugal, along with the items listed in Article 19 of the Legal Framework for Payment Services and Electronic Money (Portuguese acronym: RJSPME). The payment institution/electronic money institution authorisation process lasts for three months from the date when Banco de Portugal receives all evidence and information necessary for a proper examination of the application, and up to 12 months of the initial application (Article 23 of RJSPME).
  • Establish a branch, use agents or electronic money distributors, or pursue business under the freedom to provide services through the “European passport scheme”, if these entities already have a subsidiary in the EU. In this case, the payment institution or electronic money institution, via its subsidiary established in an EU Member State, may send to the competent authorities of the subsidiary's home Member State a passport notification to provide services in Portugal, either under the freedom to provide services or the freedom to establish a branch, the use of agents or electronic money distributors, provided that these services are covered by the authorisation granted to the subsidiary. Within one month of receipt of all necessary information, the competent authorities of the home Member State must send it to Banco de Portugal. Within one month of receipt of the information by the home Member State’s competent authorities, Banco de Portugal must assess the aforementioned information and provide all relevant information for the provision of services as set out by the institution to the competent authorities of the home Member State. Any institutions authorised in another Member State may commence their activity in Portugal as soon as the competent authority of the home Member State notifies them of their decision to register the branch, agent or distributor of electronic money, as well as to pursue their activity under the freedom to provide services.
  • Establish a branch (only permitted in the case of electronic money institutions). Portuguese law does not allow for the establishment in Portugal of a branch of third country payment institutions. It does, however, provide for the establishment of branches of electronic money institutions from non-EU countries, under the scheme envisaged in Article 47 of RJSPME. For the establishment of a branch of a third country electronic money institution, the supervisory authority of the home country must send a communication setting out all the items listed in Article 49(1) and Article 58(2) of RGICSF, mutatis mutandis, to Banco de Portugal. The branch authorisation process lasts for three months from the date when Banco de Portugal receives all evidence and information necessary for a proper examination of the application, and up to 12 months of the initial application.

 

UCITS management companies

Decree-Law No 144/2019 of 23 September 2019, Banco de Portugal’s responsibility for the prudential supervision of these management companies was transferred to CMVM with effect from 1 January 2020.