Portuguese Government changes its financial supervision and gets banks’ resolution power

  • ECO News
  • 18 September 2017

The President will name both the governor of BdP and the president of the Board of Financial Supervisory and Stability, the new entity for banking resolution.

The Government created a new financial supervisor which can dissolve banks. Now, with the changes in the supervisory system, it is the Executive itself who will take on the banking resolution dossier, whith the power to decide on the future of struggling banks, after cases such as Banif and BES. But there are more changes in the financial supervision in the country, according to the work group headed by Carlos Tavares, presented this Monday by Mário Centeno.

A new supervisor with reinforced powers will be created: the Board of Financial Supervisory and Stability (CSEF), replacing the current National Council of Financial Supervisors (CNSF), which includes the Bank of Portugal, CMVM and the Insurance Supervisory Authority (ASF).

Besides taking over the supervisory macroprudencial powers from the Bank of Portugal, the new entity will also take away from the institution headed by Carlos Costa the power to dissolve banks. The banking resolution authority will also be removed from the Bank of Portugal (BdP) because, more exactly, banks resolution will be assigned to an autonomous branch within the CSFE, which will be headed by two executive administrators chosen by the Finance minister. Therefore, although indirectly, Mário Centeno will be responsible for deciding the future of problematic banks.

According to the proposal presented in the Financial Supervisory Reform Model, the new entity (CSEF) will be responsible, along with BdP and other entities, for:

  • making decisions concerning the evaluation of recovery plans and issuing recommendations;
  • assessing the resolution of banking institutions;
  • conceiving and updating resolution plans;
  • assessing if terms are met for applying a resolution matter and indeed applying resolution measures.

In addition to the two executive administrators appointed by the Government, who would be exclusive, the Board of CSEF will have a president and representatives from supervisors from BdP, CMVM and ASF.

The President will name the next BdP governor

The President Marcelo Rebelo de Sousa will be the one who will appoint the successor of Carlos Costa, current governor of the Bank of Portugal. If there are no changes in the calendar, it will happen in 2020. According to the same report from the labor group for the financial supervisory reform, the President will name both the governor of BdP and the president of the Board of Financial Supervisory and Stability (CSEF). The Governor will be able to make a proposal in Parliament, which could reject the names presented.