PORTUGAL Law and Practice Contributed by: Pedro Cassiano Santos, Francisca César Machado, Chen Chen and Natalia Fedorova, VdA
Liquidity Requirements Under Commission Delegated Regulation (EU) 2015/61 of 10 October 2015 to supplement Regulation (EU) No 575/2013 of the European Parliament and the Council with regard to liquid - ity coverage requirement for credit institutions, a liquidity coverage ratio of at least 100% must be maintained by credit institutions. In this context, liquidity inflows and liquidity outflows shall be assessed over a 30 calendar-day stress period. The liquidity coverage ratio shall be reported to Banco de Portugal by the credit institution in question. 8. Insolvency, Recovery and Resolution 8.1 Legal and Regulatory Framework The Legal Framework of Credit Institutions and Financial Companies, which implemented the Bank Recovery and Resolution Directive (BRRD) – Directive 2014/59/EU of the European Parlia - ment and of the Council of 15 May 2014 estab - lishing a framework for the recovery and resolu - tion of credit institutions and investment firms, which largely adopts the FSB Key Attributes of Effective Resolution Regime, establishes four resolution tools that can be applied by Banco de Portugal: • sale, in part or in whole, of the business; • bridge, in part or in whole, of the credit insti - tution; • asset separation, in part or in whole; and • bail-in. Firstly, in case of a sale of the business, Banco de Portugal may determine the partial or total sale of the rights and obligations of a credit institution under resolution, including its assets,
– capital ratio of 4.5%; (ii) Tier 1 – capital ratio of 6%; (iii) total capital ratio – 8%; and (iv) leverage ratio – 3%. According to the Legal Framework of Credit Institutions and Financial Companies, credit institutions must maintain, in addition to the 4.5% CET1, (i) a capital conservation buffer equal to 2.5% of the risk-weighted assets (RWA, as defined in the CRR); and (ii) a countercyclical capital buffer of between 0% and 2.5% of the RWA in Portugal (in increments of 0.25% or mul - tiples thereof). Banco de Portugal has already announced that it intends to set the percentage of the countercyclical capital reserve at 0.75% of the total amount of the national banking sec - tor’s credit exposures to the non-financial private sector weighted by risk. Global Systemically Important Institutions (G-SIIs) must maintain, on a consolidated basis, a G-SII buffer composed of CET1 capital cor - responding to the specific subcategory it is assigned to, as follows: (i) in the lowest subcat - egory, a buffer of 1% of the RWA is required; (ii) in the subsequent subcategories, the required capital buffer for each subcategory increases in increments of at least 0.5% of the RWA. Current - ly, there are no G-SIIs in Portugal and, therefore, this is not applicable. In turn, Other Systemically Important Institutions (O-SIIs) must maintain, on a consolidated, sub-consolidated, or individual basis, as applicable, an O-SII buffer composed of CET1 capital of up to 3% of the RWA, taking into account the criteria for identifying O-SIIs. As from 1 October 2024, a sectoral systemic risk buffer of 4% is applicable, as determined by Banco de Portugal. This buffer is applicable to institutions using the Internal Ratings Based (IRB) approach, based on the RWA of the resi - dential mortgage portfolio secured by properties located in Portugal.
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