Notice No. 2/2020

Notice of the Bank of Portugal
No. 2/2020
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Published in: DR, 2nd Series, No. 89, Part E, of 07-05-2020 Mod. 99999939/T – 01/14 Index Text of the Notice Text of the Notice Within the context of the COVID-19 pandemic, Decree-Law No. 10-J/2020, of March 26, was approved, which establishes a moratorium, until September 30, 2020, applicable to certain credit operations concluded with individuals and legal entities (public moratorium). This Decree-Law, subsequently amended by Law No. 8/2020, of April 10, assigns to the Bank of Portugal, in accordance with Articles 6-A and 10 of Decree-Law No. 10-J/2020, the duty to regulate the information duties to be observed by institutions regarding operations covered by the exceptional and temporary measures to respond to the COVID-19 pandemic provided for therein, both in relations with their respective clients and within the scope of supervision by the supervisor. In accordance with paragraph 1 of Article 8 of Decree-Law No. 10-J/2020, of March 26, the Bank of Portugal is, in fact, the authority responsible for the supervision and inspection of the public moratorium regime, with the duty, in the exercise of this mandate conferred by the legislator, to monitor the implementation by institutions of the extraordinary support measures provided for in the cited instrument. In parallel, private initiative moratoria were implemented by institutions, applicable to situations excluded from the scope of application of Decree-Law No. 10-J/2020, of March 26 (private moratoria). The European Banking Authority (EBA) issued, at the beginning of April, a set of guidelines regarding public and private moratoria applicable to credit operations in the context of the current pandemic (Guidelines), establishing the terms and conditions that these moratoria must comply with so that their application, by itself, does not lead to the marking of credit operations as being in default or as restructured (forborne), in accordance with and for the purposes of Regulation (EU) No. 575/2013 of the European Parliament and of the Council, of June 26, 2013 (“CRR”) and the EBA Guidelines regarding, inter alia, the application of the definition of default in accordance with Article 178 of the CRR (EBA/GL/2020/02). For its part, the Bank of Portugal issued Circular Letter No. CC/2020/00000022, recommending that supervised institutions (credit institutions and entities listed in Article 1 of Bank of Portugal Notice No. 11/2014, of December 22) comply with the EBA Guidelines. Thus, among other guidelines, institutions must collect and maintain a set of documentation regarding the public and private moratoria they are applying, as well as notify the Bank of Portugal regarding private moratoria applied to their clients.

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The effective implementation of the public moratorium depends on its adequate dissemination by institutions to potential beneficiaries. Additionally, and considering private moratorium initiatives, it is important to ensure the correct identification by clients of the type of moratorium to which they adhere, public or private. Finally, considering that both types of moratorium have the same purpose – to support families and businesses due to the economic and financial impacts resulting from the COVID-19 pandemic – it is considered that the principle of information transparency acquires special relevance in both situations, so it is important that there are identical information duties to be provided to clients, regardless of the public or private nature of the moratorium. The present Notice does not exhaust the scope of matters that need to be regulated for full compliance with Decree-Law No. 10-J/2020, showing that it is still necessary to regulate some information reporting duties of institutions to the Bank of Portugal in the context of the mandate conferred by the legislator, namely to evaluate the implementation of the various moratorium regimes and assess their impact on institutions and their clients. These duties will be regulated by specific Instructions, as they essentially concern matters related to the definition and operationalization of the information duties of supervised entities towards the Bank of Portugal. The hearing of interested parties was dispensed with on the grounds provided for in item a) of paragraph 3 of Article 100 of the Administrative Procedure Code. Thus, in accordance with paragraph 3 of Article 6-A and paragraph 2 of Article 10 of Decree-Law No. 10-J/2020, of March 26, and paragraph 4 of Article 77 of the General Regime of Credit Institutions and Financial Companies, approved by Decree-Law No. 298/92, of December 31, the Bank of Portugal determines the following:

Article 1.
Object

1. This Notice regulates the information duties to clients to be observed by institutions regarding credit operations covered by the exceptional and temporary measures to respond to the COVID-19 pandemic provided for in Decree-Law No. 10-J/2020, of March 26 (“public moratorium”), as well as in the context of private initiative moratoria approved in accordance with the requirements contained in the guidelines issued by the European Banking Authority (EBA/GL/2020/02) (“private moratorium”).
2. The information reporting duties to the Bank of Portugal regarding the application by institutions of the public moratorium and private moratoria are regulated by a specific instruction.
3. Exposures covered by the moratorium are communicated to the Credit Liability Central (CRC) in accordance with the procedures published by the Bank of Portugal under Decree-Law No. 204/2008, of October 14, and Bank of Portugal Instruction No. 17/2018, which approves the Regulation of the Credit Liability Central.

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Article 2.
Scope

1. The information duties provided for in this Notice are observed by institutions regarding the following operations:
   a) Credit operations covered by the public moratorium; b) Other credit operations not covered by the public moratorium and which are subject to a private moratorium.
2. For the purposes of this Notice, “institutions” are considered, in conformity with the provisions of Article 3, paragraph 1, of Decree-Law No. 10-J/2020, of March 26, to be credit institutions, credit finance companies, investment companies, finance lease companies, factoring companies and mutual guarantee companies, as well as branches of credit institutions and financial institutions operating in Portugal, that contract credit operations covered by the public moratorium or by a private moratorium.

Article 3.
Disclosure of moratoria

1. Institutions that market credit operations covered by the public moratorium or by private moratoria make information available about the moratoria, in a prominent location, in their respective public service locations, and on the home page of their websites, as well as in home banking and mobile applications, where they exist.
2. Institutions disseminate information about the public moratorium and private moratoria in a way that clearly identifies the nature of the moratorium to which that information refers.
3. Institutions also send to all clients who have contracted credit operations covered by the public moratorium or by private moratoria to which they have adhered, a communication, via email, short message service (SMS) or any other channel usually used in communications established with each client, informing about the existence of said moratoria and the locations where the client can obtain additional information.

Article 4.
Information on moratoria

1. The information on moratoria, public or private, to be disseminated in accordance with the previous article includes, at least, the following elements:
   a) Credit operations covered; b) Potential beneficiaries and their eligibility requirements; c) The process for adhering to moratoria, containing, inter alia, the following information:
   i. Form of presentation of the adherence declaration;
   ii. Documentation to be presented, if applicable;
   iii. In the case of a private moratorium, who must present the adherence request regarding credit operations with more than one holder;

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iv. The manner in which the application, or non-application, of the moratorium will be communicated to the client;
v. Deadline for the communication referred to in the previous sub-item.
d) Types of moratorium and measures covered by the moratorium; e) Duration of each moratorium, with express reference to its start and end, as well as to the possibility for the client to request the end of the moratorium before the end of the agreed period, if applicable; f) Impacts resulting from the application of the moratorium on the value of installments and the repayment period of credit operations; g) In the case of a private moratorium, the impact of that moratorium on the guarantees provided within the scope of credit operations; h) Deadline for adherence to each moratorium.
2. Institutions that have adhered to private moratoria make available a form for the adherence of banking clients, in which the measures covered by the moratoria and their respective impacts are specified, and which allows clients to indicate their desired options.

Article 5.
Application and refusal of application of moratoria

1. Following the presentation of the adherence declaration to the public moratorium or the adherence request to a private moratorium, institutions inform the client about the application of the moratorium or, in the case where the client does not meet the required conditions, about the non-application of the moratorium and the respective grounds.
2. The communication referred to in the previous paragraph must be made, on a durable medium, through the means usually used in communications established with each client within the scope of the credit operation in question.
3. The communication provided for in paragraph 1 contains information about the impact of the application of the moratorium on the credit operation covered by the moratorium.
4. When there is a guarantee associated with the credit operation to which a public moratorium or a private moratorium has been applied, institutions inform the guarantor of its application, through a communication on a durable medium, specifying which impacts, in accordance with legal and contractual terms, the application of the moratorium may entail for the guarantor.

Article 6.
General duty of assistance

1. Institutions ensure the clarification of doubts raised by clients by making available, in an easy and permanently accessible location, notably on their website, a frequently asked questions section regarding the application of the public moratorium and private moratoria to which they have adhered.
2. The clarification of doubts can also be guaranteed through a telephone service line or a personalized chat.

Article 7.
Entry into force
This Notice enters into force on the date of its publication.
April 28, 2020. The Governor, Carlos da Silva Costa.