Notice No. 900/84 by the Bank of Portugal on Liquidity Requirements for Credit Institutions

Notices from the Bank of Portugal Notice No. 900/84

It is communicated that, under the superior guidance of the Minister of Finance and Planning, the Bank of Portugal, in the exercise of the competence attributed to it as the central bank by Article 16 of its Organic Law, and considering the provisions of paragraph c) of paragraph 2 of Article 27 of the same Organic Law, determines the following:

1.º - 1 - The average amount of national currency cash holdings of credit institutions shall not, in each week, be less than the sum of the following values: a) 12%, 9% and 6%, respectively for deposits up to 180 days, for deposits of more than 180 days and up to 1 year, and for deposits of more than 1 year, of the average of effective liabilities in national currency to third parties, excluding the Bank of Portugal and other credit institutions, calculated in the previous week; b) 12%, 9% and 6%, respectively for deposits up to 180 days, for deposits of more than 180 days and up to 1 year, and for deposits of more than 1 year, of the average of liabilities for deposits in foreign currency relating to accounts opened in the name of residents, also calculated in the previous week.

2 - On the last day of each month, and without prejudice to the provisions of the previous paragraph, the amount of said cash holdings shall be, at least, equal to the sum of 12%, 9% and 6% of liabilities up to 180 days, more than 180 days without exceeding one year, and more than 1 year, respectively.

3 - For the purposes of the provisions of the previous paragraph 1, weeks shall be counted ending on the 8th, 15th, 22nd, and last day of each month.

4 - In the calculation of weekly averages, Saturdays, Sundays, and holidays are considered with the balances of the immediately preceding business day.

5 - For the purposes of the provisions of the previous paragraphs 1 and 2, only national currency cash holdings are considered: a) Banknotes and coins in vaults at credit institutions; b) Balances of current deposit accounts opened at the Bank of Portugal in the name of the respective credit institutions.

2.º In addition to other liabilities that the Bank of Portugal deems, when circumstances justify it, should be excluded, the following shall not be considered in the liabilities referred to in paragraphs 1 and 2 of paragraph 1.º: a) Amounts of bonds in circulation issued by credit institutions; b) Liabilities to the public sector (central and local administration bodies and social security).

3.º - 1 - The average amount of balances of current deposit accounts opened at the Bank of Portugal in the name of credit institutions shall not, in each week, be less than 70% of the minimum amount of cash holdings, calculated in accordance with the provisions of the previous paragraphs.

2 - On the last day of each month, and without prejudice to the provisions of the previous paragraph, the amount of balances of said current deposit accounts opened at the Bank of Portugal shall be, at least, equal to 70% of the global minimum value of cash holdings calculated in accordance with the provisions of paragraph 2 of paragraph 1.º.

3 - Savings banks are exempt from complying with the provisions of the previous paragraphs 1 and 2 whenever the minimum amounts referred to therein are less than 700,000$00.

4.º - 1 - The amount of minimum cash holdings referred to in paragraph 1.º may be increased by decision of the Bank of Portugal, whenever credit institutions do not achieve the objectives of the directives or constraints established by that Bank, under the terms of paragraphs a) and c) of Article 28 of its Organic Law, and the values corresponding to the liquidity increases imposed by such decision must be deposited, in their entirety, at the Bank of Portugal.

2 - Decisions taken in conformity with the previous paragraph shall be communicated directly by the Bank of Portugal to the credit institutions concerned.

5.º Credit institutions shall maintain records that allow, at all times, daily control of their liquidity situation, defined in accordance with this notice.

6.º - 1 - The amount of effective liabilities to third parties, in national or foreign currency, payable on demand or at term up to 90 days, inclusive, shall be, at any moment, fully covered by the following values: a) Values eligible for inclusion in cash holdings; b) Other asset values, excluding financial participations and other fixed assets, expressed in national or foreign currency, provided they are realizable at a term not exceeding 1 year.

2 - The liabilities referred to in the previous paragraph 1, in the case of credit institutions that only practice credit for more than 1 year, may be covered by asset values, excluding financial participations and other fixed assets, expressed in national currency and representative of operations realizable at a term exceeding 1 year.

7.º The amount of effective liabilities to third parties, in national or foreign currency, payable at a term exceeding 90 days shall be, at any moment, fully covered by the following values: a) Excess of the asset values referred to in paragraph 6.º over the liabilities mentioned therein; b) Other asset values, excluding financial participations and other fixed assets, provided they are securely realizable.

8.º Credit institutions, with the exception of investment banks, are obliged to include in their assets national debt securities, with the exception of those acquired in the interbank securities market, or state-guaranteed bond securities, whose global value, determined according to their respective acquisition prices, shall not be less than 5% of the total of liabilities for deposits in national or foreign currency.

9.º Credit institutions must observe, in the valuation of their asset and liability values, notably for the purposes of the provisions in paragraphs 6.º and 7.º of this notice, the following rules: a) Minted and bar gold shall be assigned the value corresponding to its weight in fine gold evaluated at 254.92 United States dollars per troy ounce of fine gold, applying for the calculation of equivalence in escudos of that value the average between the buying and selling exchange rates of the dollar in force in the national market on the last day of each month; b) The value of foreign banknotes and coins shall be determined by applying the average between the buying and selling exchange rates established in the national market for the last day of each month; c) Values in foreign currency shall be calculated by applying the average between the buying and selling exchange rates established in the national market for the last day of each month or, in their absence, through cross-rates between the escudo and these foreign currencies in the London and New York markets; d) The value of foreign securities shall be calculated by applying to the last stock exchange quotation that took place in the preceding 6 months or, in their absence, to the nominal or acquisition value, whichever is lower, the rules enumerated in the previous paragraph c); e) The value of national securities that are not financial participations shall be the result of their last official or unofficial quotation, in any stock exchange that took place in the preceding 6 months or, in their absence, the acquisition value. In the event that the last quotation occurred simultaneously at the Lisbon and Porto Stock Exchanges, the lower of both values shall be considered. In the case of state bonds or others equivalent, the lower of the acquisition or nominal values shall be considered. In the case of shares of nationalized companies, the acquisition value shall be considered until the indemnification value is fixed; f) Silver values shall be evaluated for all purposes at the average acquisition cost; g) Numismatic and medal values shall be evaluated for all purposes at the average acquisition cost; h) Fixed assets, including financial participations, shall be evaluated at acquisition cost; i) Other asset elements shall be evaluated at their respective nominal values.

10.º Doubts that arise in the application of this notice shall be resolved by the Bank of Portugal, through instructions transmitted to all credit institutions.

11.º Notice No. 2/79 of the Bank of Portugal of April 8, published in the Diário da República, 1st series, No. 100, of May 2, 1979, is hereby repealed.

12.º This determination enters into force on July 1, 1984.

20-6-84. - The Minister of Finance and Planning, Ernâni Rodrigues Lopes.