Notice No. 2/2022

Notice of the Bank of Portugal No. 2/2022 .................................................................................................................................................................................................. Published in: DR, 2nd Series, No. 220, Part E, of 15-11-2022 Mod. 99999939/T – 01/14

Index Text of the Notice Text of the Notice

The European Central Bank’s Guidance (EU) 2022/508 of 25 March 2022 (ECB/2022/12) amends the European Central Bank’s Guidance (EU) No. 2017/697 of 4 April 2017 on the exercise of powers and options provided for in Union law by national competent authorities with regard to less significant credit institutions (ECB/2017/9), whose implementation was carried out by Bank of Portugal Notice No. 10/2017. Thus, it is now necessary to implement the aforementioned Guidance by updating that Notice.

Indeed, the European Central Bank’s Guidance binds the Bank of Portugal, as well as other national competent authorities, to implement it through national regulation with regard to less significant credit institutions, as determined in Article 6(5)(a) of Council Regulation (EU) No 1024/2013 of 15 October, which confers specific tasks upon the European Central Bank concerning policies relating to the prudential supervision of credit institutions.

In addition to this Guidance, the European Central Bank also issued Recommendation ECB/2022/13 of 25 March 2022, which amends Recommendation ECB/2017/10 of 4 April 2017 on common specifications for the exercise, on a case-by-case basis, of powers and options provided for in Union law by national competent authorities with regard to less significant credit institutions, revoking one of the provisions of that Recommendation ECB/2017/10, which was also contained in Bank of Portugal Notice No. 10/2017, thereby also raising the need to update the Notice regarding that provision.

The revisions introduced by the aforementioned Guidance and Recommendation of the European Central Bank aim to reflect the legislative changes adopted with the introduction of Regulation (EU) 2019/876 of the European Parliament and of the Council of 20 May 2019, which amends Regulation (EU) No 575/2013 as regards the leverage ratio, the net stable funding ratio, own funds and eligible liabilities, counterparty credit risk, market risk, positions with central counterparties, positions with collective investment undertakings, large exposures and reporting and disclosure requirements, and Regulation (EU) No 648/2012 (commonly known as “CRR2”), with most of those revisions relating to the application of liquidity requirements. Through the European Central Bank’s Guidance (EU) 2022/508 of 25 March 2022 (ECB/2022/12), some options associated with Commission Delegated Regulation (EU) 2015/61 of 10 October 2014 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council as regards the liquidity coverage requirement for credit institutions are also updated.

Notice of the Bank of Portugal No. 2/2022 …………............................................................................................................................................................................................... Mod. 99999939/T – 01/14

The subjective scope of Bank of Portugal Notice No. 10/2017 is also updated, removing from its scope both economic banks excluded from the supervisory powers conferred upon the European Central Bank, since there are no longer entities of this type in Portugal that do not take the form of a public limited company, and investment firms, which have become subject to the prudential supervision of the Securities Market Commission, following the publication of Decree-Law No. 109-H/2021 of 10 December.

The draft of this Notice was subject to a hearing of interested parties.

In these terms, the Bank of Portugal, in the exercise of the competence conferred upon it by Article 17 of its Organic Law, approved by Law No. 5/98 of 31 January, by Article 99(1) and Article 121-A of the General Regime of Credit Institutions and Financial Companies, approved by Decree-Law No. 298/92 of 31 December, by Article 282(6), by Article 420(2), by Article 428-P(10), by Article 428-Q(2), by Article 428-AQ(10), by Article 428-AR(2), all of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013, by point (i) of Article 12(1)(c), by Article 12(3), by Article 23(2) and by Article 24(4), all of Commission Delegated Regulation (EU) 2015/61 of 10 October, and also by European Central Bank Guidance (EU) 2022/508 of 25 March (ECB/2022/12), by Article 1(3) of Recommendation ECB/2022/13 of 25 March, and by Article 6(5)(a) of Council Regulation (EU) No 1024/2013 of 15 October, determines the following:

Article 1. Object

This Notice implements European Central Bank Guidance (EU) 2022/508 and Recommendation ECB/2022/13, both from the European Central Bank, on, respectively, the amendment of European Central Bank Guidance (EU) 2017/697 and the amendment of Recommendation ECB/2017/10, relating to the exercise of powers and options provided for in Union law by national competent authorities with regard to less significant credit institutions, by amending Bank of Portugal Notice No. 10/2017.

Article 2. Additions to Bank of Portugal Notice No. 10/2017

The following articles are added to Bank of Portugal Notice No. 10/2017:

a) “Article 8-A Liquidity coverage ratio - identification of important stock indices of Member States or third countries For the purposes of point (i) of Article 12(1)(c) of Delegated Regulation (EU) 2015/61, the Bank of Portugal weighs whether the following indices may be considered important stock indices in determining the scope of shares that may be considered Level 2B assets under the aforementioned point (i) of Article 12(1)(c):

i) The indices listed in Annex I to Commission Implementing Regulation (EU) 2016/1646; ii) Any important stock index, not included in point (i), in a Member State or a third country, identified as such for the purposes of this point by the competent authority of the Member State or the public authority of the third country concerned; iii) Any important stock index, not included in points (i) or (ii), that includes leading companies in the relevant jurisdiction.”

b) “Article 8-B NSFR - Stable funding factors required for off-balance sheet exposures

1. For the purposes of Article 428-P(10) of Regulation (EU) No 575/2013, unless the Bank of Portugal sets other stable funding factors required, with regard to off-balance sheet exposures within the scope of that provision, entities apply to off-balance sheet exposures not referred to in Part Six, Title IV, Chapter 4 of Regulation (EU) No 575/2013 the stable funding factors corresponding to the exit rates they apply to products and services related in the context of Article 23 of Delegated Regulation (EU) 2015/61, for compliance with the liquidity coverage requirement.

2. For the purposes of Article 428-AQ(10) of Regulation (EU) No 575/2013, entities authorized to apply the simplified net stable funding requirement referred to in Part Six, Title IV, Chapter 5 of Regulation (EU) No 575/2013, adopt the method provided for in the previous paragraph.”

c) “Article 8-C NSFR - Determination of the maturity period for assets that have been segregated

1. For the purposes of Article 428-Q of Regulation (EU) No 575/2013, when entities cannot freely sell assets that are segregated in accordance with Article 11(3) of Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on over-the-counter derivatives, central counterparties and trade repositories, those assets are subject to a period corresponding to the duration of liabilities to the clients of the entities to which that segregation requirement refers.

2. For the purposes of Article 428-AR(2) of Regulation (EU) No 575/2013, entities authorized to apply the calculation of the simplified net stable funding requirement referred to in Part Six, Title IV, Chapter 5 of Regulation (EU) No 575/2013, adopt the method provided for in the previous paragraph.”

Article 3. Repealing Provision

The following provisions of Bank of Portugal Notice No. 10/2017 are repealed:

a) Points (b) and (c) of Article 2(1); b) Article 5; c) Article 8; d) Article 9.

Article 4. Entry into Force

This Notice enters into force on the day following its publication and is applicable to information reporting periods whose reference date occurs after 1 October 2022.

2 November 2022. - The Governor, Mário Centeno.