PORTUGAL Law and Practice Contributed by: Pedro Cassiano Santos, Francisca César Machado, Chen Chen and Natalia Fedorova, VdA
There is a general principle that credit institu - tions must manage their available funds in a manner that ensures adequate levels of liquidity and solvency, at all times. Initial Share Capital According to Executive Order No 95/94, of 9 February 1994, the following credit institutions and financial companies must have a share capi - tal of at least the amounts indicated below. • Banks and savings banks: EUR17.5 million. • Mutual agricultural credit banks: EUR5 million or EUR7.5 million, depending on whether or not they are part of the integrated mutual agricultural credit system. • Central agricultural credit banks: EUR17.5 million. • Investment companies: EUR5 million. • Leasing companies: EUR3 million if their sole business is movable property leasing, or EUR5 million in all other cases. • Factoring companies: EUR1 million. • Financial brokerage companies: EUR3.5 mil - lion. • Brokerage firms: EUR350,000. • Money market or currency market brokers: EUR50,000 or EUR500,000, depending on whether they operate exclusively in the mon - ey market or in both markets simultaneously. • Asset management companies: EUR250,000. • Regional development companies: EUR3 million. • Group purchasing management companies: EUR500,000 or EUR250,000, depending on whether they manage groups constituted for the acquisition of real estate. • Currency exchange agencies: EUR100,000. • Mutual guarantee companies: EUR2.5 million. • Microcredit financial companies: EUR1 mil - lion. • Financial credit institutions: EUR10 million.
• Financial credit companies: EUR7.5 million. • Attached savings banks: EUR1 million. Risk Management Rules Credit institutions establish a risk management function that is independent of the business lines and is provided with adequate resources. This function is responsible for: (i) ensuring that all material risks of the credit institution are properly identified, assessed, and reported; (ii) participat - ing in the definition of the credit institution’s risk strategy; and (iii) participating in decisions relat - ed to the management of material risks. The risk management, compliance, and internal audit functions are established as autonomous and independent from each other. The board of directors ensures that the risk management function has a comprehensive view of all the risks to which the credit institution is currently exposed and may be exposed in the future. Capital Requirements The CRR addresses capital requirements, such as Common Equity Tier 1 (CET1), which is a part of Tier 1 capital and involves shares, capi - tal instruments ranking below all other claims in an insolvency, share premium accounts, retained earnings, other reserves, and funds designated for general banking risks. In addition to CET1, Tier 1 capital also encompasses Additional Tier 1 (AT1) capital, which includes capital instruments subordinated to Tier 2 instruments in an insol - vency, along with their related share premium accounts. In contrast, Tier 2 capital is com - posed of subordinated instruments and associ - ated share premium accounts, which rank below CET1 in priority. In quantitative terms, credit institutions must ensure that they maintain at all times the own funds required under the CRR, namely: (i) CET1
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