Circular Letter No. CC/2020/00000013

The document requires credit institutions to subject any increase in risk for high-risk debtors or groups to the approval of the institution's management body in a plenary meeting and to provide immediate notification to the supervisory body, regardless of the decision outcome. It defines 'increase in risk' as new credit grants or restructuring involving additional financing or reduced risk mitigation, and 'high-risk debtors' as those with non-performing exposures or past material losses from debt forgiveness or write-downs. Institutions must establish internal policies with materiality criteria compatible with their size and risk appetite, which must be approved by the management body after a prior opinion from the supervisory body. These approved internal policies must be submitted to the Bank of Portugal by June 30, 2020.

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Circular Letter No. CC/2020/00000013
Sent to:
Credit Institutions.
Mod. 99999924/T – 01/14
Subject: Process for granting and restructuring credit to debtors or groups of debtors with increased risk

Dear Sirs,

Following the recent economic and financial crisis, the Portuguese financial system accumulated a very significant volume of non-performing assets, the reduction of which, through sales, renegotiations, and write-offs, has resulted in the recording of losses of high materiality.

Without prejudice to the effects of the crisis having strongly limited the borrowers' capacity to pay their debts, this accumulation of non-performing assets has highlighted – as indeed verified in several Member States of the euro area – the need for credit institutions to strengthen their internal decision-making mechanisms for granting credit and subsequent regular monitoring of the associated risk.

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Lineage: In force

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Source: Banco de Portugal — original document · Summary generated with machine assistance and reviewed before publication; the authoritative text is the regulator's original document. How RegAlert works