Instruction (Historical) No. 3/2022

Instruction No. 3/2022 BO No. 2/2022 Supplement • 2022/02/17 .................................................................................................................................................................................................. Topics Payment Systems :: Clearing Mod. 99999940/T – 01/14 Index Text of the Instruction Text of the Instruction Subject: Amendment of Instruction No. 8/2018 This Instruction aims to revise the regulation of the Interbank Clearing System (SICOI), contained in Instruction No. 8/2018, of March 22 (BO No. 3/2018, Supplement), in order to introduce the necessary changes to accommodate the accessibility measures of the TARGET Instant Payment Settlement (TIPS) established in Instruction No. 54/2012, of January 15, 2013. Indeed, it results from Instruction No. 54/2012 that, by February 25, 2022, the SICOI technical account that serves as collateral for the financial settlement of payment operations processed in the instant transfer subsystem, hitherto opened at TARGET2-PT, must migrate to TIPS, and participants in the instant transfer subsystem of SICOI must indicate, instead of an account at TARGET2, a dedicated TIPS cash account. Thus, under the competence attributed to it by Article 14 of its Organic Law and by Article 92 of the General Regime of Credit Institutions and Financial Companies (RGICSF), which confer powers to regulate, supervise and promote the good functioning of payment systems, the Bank of Portugal alters the provisions of Instruction No. 8/2018 – Regulation of the Interbank Clearing System (SICOI), as well as some of its Annexes, determining the following:

1. Paragraphs 15.1., 16.1, 16.2., 16.3., 17.2, 25.1., 27.1 and 42.1. of Instruction No. 8/2018, of March 22, shall have the following wording: «15.1. The Bank of Portugal is the holder of an account at the TARGET Instant Payment Settlement (TIPS), hereinafter referred to as the “SICOI technical account”, which serves as collateral for the financial settlement of payment operations processed in the instant transfer subsystem.»

«16.1. Each direct participant must indicate a dedicated TIPS cash account from which it effects the provisioning of the SICOI technical account.»

Instruction No. 3/2022 BO No. 2/2022 Supplement • 2022/02/17 Topics Payment Systems :: Clearing .................................................................................................................................................................................................. Mod. 99999940/T – 01/14

«16.2. Liquidity transfers between the SICOI technical account and the dedicated TIPS cash account indicated by the direct participant, in accordance with 16.1., are effected by the Bank of Portugal, directly, or by the processing entity referred to in Title VI, on behalf of the direct participant, in accordance with TIPS rules.»

«16.3. In accordance with paragraph 16.2., the direct participant grants authorization to the Bank of Portugal, directly, or to the processing entity referred to in Title VI, to debit and credit the dedicated TIPS cash account indicated by it.»

«17.2. The balance of the register account of each direct participant is affected in real time, by the Bank of Portugal, directly, or by the processing entity referred to in Title VI: a) By liquidity transfers (credits and debits) effected between the dedicated TIPS cash account indicated by it and the SICOI technical account; and b) By debits and credits corresponding to the processing of instant transfers involving the direct participant or any of the indirect participants represented by it.»

«25.1. The processing entity must comply with the minimum operational service levels defined for the processing of payment operations in each subsystem, as well as for the integration of files into TARGET2-PT and TIPS.»

«27.1. Risk mitigation is ensured by the implementation of the following mechanisms/instruments: Risk Mechanisms / Instruments Legal Risk SICOI Regulation Subsystem Operation Manuals Service provision contract with the SICOI processing entity Operational Risk Business continuity procedures in contingency situations Communication procedures between the Bank of Portugal (level 2) and the processing entity (level 3) Liquidity Risk SICOI Guarantee Fund Account at TARGET2-PT for subsystems with deferred clearing and settlement Pre-funding of the SICOI technical account for the subsystem with real-time clearing and settlement

Instruction No. 3/2022 BO No. 2/2022 Supplement • 2022/02/17 Topics Payment Systems :: Clearing .................................................................................................................................................................................................. Mod. 99999940/T – 01/14

Credit Risk Maximum limit per operation in subsystems with deferred clearing and settlement Recalculation of clearing balances in subsystems with deferred clearing and settlement Pre-funding of the SICOI technical account for the subsystem with real-time clearing and settlement »

«42.1. The tariff schedule applied by the Bank of Portugal to SICOI participants is based on the recovery of costs incurred with the management of SICOI and the settlement of operations at TARGET2 and TIPS.»

2. The heading of paragraph 36 of Instruction No. 8/2018, of March 22, shall have the following wording: «Pre-funding of the SICOI technical account for the subsystem with real-time clearing and settlement».

3. Paragraph 2 of “Annex III – Schedule of closing times for deferred clearing and financial settlement and opening hours”, of Instruction No. 8/2018, of March 22, shall have the following wording: «2. The hours to be observed for each closing of the clearing sessions and financial settlement of the subsystems with deferred clearing and settlement that make up SICOI are described in the following table:»

4. “Annex VIII - Framework Agreement for Financial Guarantee for Operations in the Instant Transfer Subsystem”, of Instruction No. 8/2018, of March 22, shall have the following wording: «Annex VIII – Framework Agreement for Financial Guarantee for Operations in the Instant Transfer Subsystem The settlement of operations processed in the Instant Transfer Subsystem of SICOI is based on a risk management model based on the pre-funding of a SICOI technical account, held by the Bank of Portugal and operated directly by the Bank of Portugal or by the processing entity designated by it, referred to in Title VI of the SICOI Regulation (hereinafter, processing entity). This funding shall be ensured by the Direct Participant in the Instant Transfer Subsystem of SICOI (hereinafter, Participant), through the transfer of funds necessary to carry out operations in the Instant Transfer Subsystem of SICOI to the SICOI technical account, thus serving the purpose of guaranteeing the financial settlement of payment operations processed in the Instant Transfer Subsystem of SICOI.

Instruction No. 3/2022 BO No. 2/2022 Supplement • 2022/02/17 Topics Payment Systems :: Clearing .................................................................................................................................................................................................. Mod. 99999940/T – 01/14

According to the defined technical operating model, each Participant is assigned a register account that details, at all times, the funds available in their favor in the SICOI technical account. The balance available in the register account of each Participant is affected, by the Bank of Portugal, directly, or by the processing entity, in real time: i) by liquidity transfers (credits and debits) effected between the dedicated TIPS cash account indicated by them and the SICOI technical account; and ii) by debits and credits corresponding to the processing of instant transfers involving the Participant or any of the indirect participants represented by them. In this context, it is considered that funds transferred to the SICOI technical account by the Participant, or in their favor, may constitute the object of financial guarantee, in the form of fiduciary alienation as security, under the terms and for the purposes of the legal regime established by Decree-Law No. 105/2004, of May 8, in which the Bank of Portugal, as owner of SICOI, is the beneficiary of this guarantee, and the Direct Participant in the Instant Transfer Subsystem of SICOI is the provider of the guarantee. The Bank of Portugal, as beneficiary, and the Participant, as provider, are eligible subjects for the application of Decree-Law No. 105/2004, in accordance with Article 3., paragraph 1, letters a), b) and c), sub-letter i), respectively. The funds transferred to the SICOI technical account constitute cash, under the terms and for the purposes of letter a) of Article 5., paragraph 1 of Decree-Law No. 105/20104, and are therefore susceptible of constituting the object of financial guarantees, under the terms and for the purposes of said legal regime. From the regime applicable to fiduciary alienation as security it follows that, once transferred from the dedicated TIPS cash account indicated by the Participant to the SICOI technical account, the funds may be considered effectively provided, under the terms and for the purposes of paragraph 1 and paragraph 2 of Article 6. of Decree-Law No. 105/2004. Transfers of funds to the SICOI technical account, held by the Bank of Portugal, effected by the Participant, or in their favor, are registered electronically, and are therefore susceptible of proof by registration on electronic media, under the terms and for the purposes of Article 7. of Decree-Law No. 105/2004. Under Article 6., paragraph 1, letter a) of Decree-Law No. 221/2000, guarantees constituted within the framework of SICOI in favor of the Bank of Portugal are not affected by the opening of insolvency proceedings against a Participant, and may be executed by their respective holders, with the remaining balance reverting to the insolvent estate, in accordance with Article 6., paragraph 2 of the same legal instrument. Thus, Participants in the Instant Transfer Subsystem of SICOI are subject not only to the rules established in the Bank of Portugal Instruction that establishes the SICOI Regulation and in the operation manual of said subsystem (hereinafter, operation manual), which forms an integral part thereof, but also to the terms and conditions contained in the clauses of this framework agreement for financial guarantee in the form of fiduciary alienation as security, in accordance with the provisions of Decree-Law No. 105/2004, of May 8. First Clause (Object)

1. Funds credited to the SICOI technical account held by the Bank of Portugal by the Participant, or in their favor, within the scope of the Instant Transfer Subsystem of SICOI, constitute the object of this framework agreement for financial guarantee in the form of fiduciary alienation as security, framed by the regime established by Decree-Law No. 105/2004, of May 8.

2. The fiduciary alienation as security constituted under the terms of this framework agreement aims to guarantee the monetary obligations assumed by the Participant within the scope of their participation in the Instant Transfer Subsystem of SICOI. Second Clause (Credit Movement of the Technical Account)

3. The Participant accepts that the Bank of Portugal, or the processing entity, may debit the dedicated TIPS cash account indicated by them and credit the SICOI technical account, under the terms set forth in the SICOI Regulation and its operation manual, which forms an integral part thereof.

4. Ownership of funds credited to the SICOI technical account by the Participant, or in their favor, transfers to the Bank of Portugal, as security, these funds automatically becoming part of the object of this framework agreement. Third Clause (Debit Movement of the Technical Account)

5. The Participant accepts that the Bank of Portugal, or the processing entity, may debit the SICOI technical account and credit the dedicated TIPS cash account indicated by them, under the terms set forth in the SICOI Regulation and its operation manual, which forms an integral part thereof.

6. Ownership of funds transferred from the SICOI technical account held by the Bank of Portugal to the dedicated TIPS cash account indicated by the Participant transfers to the Participant upon credit to that account, ceasing at that moment to be part of the object of this framework agreement. Fourth Clause (Set-off) The Participant recognizes and accepts that the obligation of the Bank of Portugal to return funds alienated fiduciarily as security is fulfilled through automatic set-off with obligations assumed by the Participant within the scope of their participation in the Instant Transfer Subsystem of SICOI, which are reflected, at all times, in the Participant's register account, under the terms and conditions provided for in the SICOI Regulation and its operation manual, which forms an integral part thereof. Fifth Clause (Execution of Guarantee) The Participant recognizes and accepts that the cessation of their participation in the Instant Transfer Subsystem of SICOI, as well as their suspension or exclusion from said Subsystem, determines the early maturity of the Bank of Portugal's obligation to return the guarantee to the Participant and the fulfillment thereof through set-off in accordance with the previous Clause. Sixth Clause (Term and Termination)

7. This framework agreement has an indefinite duration, producing effects while the direct participation of the Participant in the Instant Transfer Subsystem of SICOI lasts.

8. This framework agreement may be terminated at any time, by notice of termination by registered mail with acknowledgment of receipt, the notice producing effects thirty working days after its receipt.

9. The Participant recognizes and accepts that the termination of this framework agreement determines their exclusion from the Instant Transfer Subsystem of SICOI and the early maturity of the Bank of Portugal's obligation to return the guarantee to the Participant and the fulfillment thereof through set-off in accordance with the Fourth Clause. Seventh Clause (Jurisdiction and Applicable Law)

10. Operations carried out under this framework agreement are subject to Portuguese law in general and, in particular, to the provisions of Bank of Portugal Instructions.

11. For any dispute, namely regarding the validity, interpretation and application of this framework agreement, as well as for the resolution of any conflicts, a Voluntary Arbitration Tribunal is competent, to be constituted in accordance with the applicable Law.

12. The Tribunal will operate in Lisbon and its object will be defined in the arbitration agreement, unless restriction which the arbitrators shall decide at the request of any of the parties, and the decision will be rendered according to equity and without appeal.

13. Nothing limits the right of the Bank of Portugal, at its exclusive discretion, to bring any actions in any national or foreign jurisdiction.»

14. Paragraphs 1.1., 1.2. and 1.3. of “Annex IX - Tariffs and Penalties”, of Instruction No. 8/2018, of March 22, shall have the following wording: «1.1. The tariff schedule applied to SICOI participants is based on the recovery of costs incurred by the Bank of Portugal with the management of SICOI and the settlement of operations at TARGET2 and TIPS and does not incorporate the costs of the processing entity and the costs of communication service providers.»

Instruction No. 3/2022 BO No. 2/2022 Supplement • 2022/02/17 Topics Payment Systems :: Clearing .................................................................................................................................................................................................. Mod. 99999940/T – 01/14

«1.2. The SICOI tariff schedule is applied monthly to direct participants in the system, with the payment of the monthly invoice and any adjustment relating to the previous year, referred to in point 1.4 of this Annex, being effected directly by the Bank of Portugal via debit to the respective settlement account. Exceptionally, and if reasons justifying it are identified, the Bank of Portugal may agree on an alternative collection mechanism with the direct participant. SICOI Tariff Schedule Prices (Euros) Monthly participation fee per subsystem or subsystem branch 1 per direct participation.............................................................................................. 44,00 per indirect participation .......................................................................................... 11,00 Fee per operation for each clearing balance settled at TARGET2 .......................................... 0,61 for each large value operation settled at TARGET2 .............................. 0,61 for each operation settled in the instant transfer subsystem ............... 0,0005 1 The direct participant in a given clearing subsystem or subsystem branch is charged for their own participation and for the participation of each of the indirect participants they represent in each subsystem or subsystem branch.»

«1.3. The portion corresponding to the application of the fee per operation aims to recover costs, incurred by the Bank of Portugal, with the settlement at TARGET2 of clearing balances and large value operations and operations settled in the instant transfer subsystem.»

6. This amendment to Instruction No. 8/2018, of March 22 – Regulation of the Interbank Clearing System (SICOI) – enters into force on February 25, 2022.