Instruction No. 2/2020

Instruction No. 2/2020 Official Gazette No. 1/2020 Supplement • 2020/01/17 .................................................................................................................................................................................................. Topics Supervision :: Prudential Standards Mod. 99999940/T – 01/14 Index Text of the Instruction Text of the Instruction Subject: Revocation of Banco de Portugal Instruction No. 4/2011 considering the entry into force of the European Banking Authority (EBA/GL/2018/04) Guidelines on stress testing of institutions

The regular performance of stress tests by institutions constitutes a fundamental instrument for the identification, assessment, and adequate management of the risks to which they are or may become exposed.

With the aim of promoting the convergence of institutions' practices in this matter, the Committee of European Banking Supervisors issued, on August 29, 2010, the "Guidelines on stress testing" ("GL32"), which were incorporated by Banco de Portugal Instruction No. 4/2011 ("Instruction No. 4/2011"), which is hereby revoked. Among other aspects, Instruction No. 4/2011 defines principles applicable to internal stress tests and requirements for periodic reporting to Banco de Portugal.

More recently, on July 19, 2018, the European Banking Authority (EBA) issued the "Guidelines on stress testing of institutions" (EBA Guidelines EBA/GL/2018/04), which repealed GL32 and established common requirements, methodologies, and organizational processes for the performance of internal stress tests, taking into account the adequacy of capital and liquidity and the risk management of institutions.

The EBA Guidelines EBA/GL/2018/04, in force since January 1, 2019, are addressed to institutions and competent authorities, both of which are required, under Article 16(3) of Regulation (EU) No 1093/2010 of the European Parliament and of the Council of November 24, 2010, to make all efforts to comply with them.

In this context, and considering that Banco de Portugal has notified the EBA of its intention to comply with the EBA Guidelines EBA/GL/2018/04, these will henceforth be considered within the framework of its regular supervisory procedures.

In light of the above, and considering that there are currently reporting obligations regarding internal stress tests in other regulatory instruments issued by Banco de Portugal, namely in Banco de Portugal Instruction No. 3/2019 relating to the Internal Capital Adequacy Assessment Process (ICAAP) and in Banco de Portugal Instruction No. 2/2019 relating to the Internal Liquidity Adequacy Assessment Process (ILAAP), Banco de Portugal considers it justified to revoke Instruction No. 4/2011.

In these terms, Banco de Portugal, using the competence conferred upon it by Article 17 of its Organic Law, approved by Law No. 5/98 of January 31, and by point (f) of paragraph 1 of Article 116 of the General Regime of Credit Institutions and Financial Companies, approved by Decree-Law No. 298/92 of December 31, approves the following:

Article 1. Revocation Provision This Instruction revokes Instruction No. 4/2011, published on March 15, 2011 in the Official Gazette No. 3/2011.

Article 2. Entry into Force This Instruction enters into force the day following its publication.