Bank of Portugal (BdP) wants an autonomous authority to handle banks’ resolutions

  • ECO News
  • 2 November 2017

The Bank of Portugal suggested changes to the banking supervision reform. The main alteration is an autonomous authority for banks' resolution. As for CSEF, BdP wants just three regulators in charge.

The Bank of Portugal (BdP) acknowledges there is room for improvement in the Portuguese financial supervisory model, but the central bank disagrees with the changes suggested by the work group headed by Carlos Tavares. BdP wants to create an autonomous national authority headed by the Finance minister — who would have the final say in cases of banks’ liquidation. In addition, BdP wants the Board of Financial Supervisory and Stability (CSEF) to have a shared presidency between BdP, CMVM (Portuguese Securities Markets Commission) and ASF (Insurance Supervisory Authority), without the intervention of external elements, unlike the Governments’ proposal that is under open consultation.

The Bank of Portugal acknowledges there are “significant opportunities for perfecting the instruments and procedures for coordinating and sharing information between banking supervisory authorities”. Nonetheless, it states that the Report from the work group’s recommendations “do not sufficiently consider the recent evolution of the European financial supervisory architecture”.

BdP’s main disagreement with Carlos Tavares’ work group is related to the entity that will be able to settle banks — which is, right now, a power held by BdP itself. Carlos Costa, BdP’s governor, looks favorably upon the Finance Ministry’s participation in the resolution process, proposing that the minister heads a resolution council within a national resolution authority he wants to have created. With this resolution council, an executive commission, assured by BdP, would be created.

The central bank believes this solution would assure those with public responsibilities would have a voting and decision power in cases where a banking resolution would have a significant impact on public accounts, while giving that entity the expertise BdP already has on the matter, especially when it comes down to prevention. Additionally, the Resolution Fund would become a part of this national resolution authority.

In the model presented by Carlos Tavares, resolution duties are allocated to an autonomous department within CSEF, the super-regulator on the table. The department would be headed by an independent administrator nominated by the Finance ministry. But in order to safeguard the independence of the regulators, the Portuguese central bank rejects the presence of any external element to the CSEF. On the contrary, it proposes to BdP that CSEF has a rotating leadership between CMVM and ASF, with equal representation and voting rights.