PORTUGAL Law and Practice Contributed by: Pedro Cassiano Santos, Francisca César Machado, Chen Chen and Natalia Fedorova, VdA
liabilities, off-balance sheet items, and managed assets, as well as the ownership of shares or other securities representing its capital stock. The referred sale is conducted on commercial terms, considering the specific circumstances of the case, and the evaluation performed by an independent entity at the expense of the credit institution under resolution. This evaluation, to be carried out within the timeframe set by Banco de Portugal, must fairly, prudently, and realisti - cally assess the credit institution’s assets, lia - bilities, and off-balance sheet items, taking into account European Union principles, rules, and guidelines on state aid. Secondly, Banco de Portugal may determine the partial or total transfer of the rights and obliga - tions of a credit institution, including its assets, liabilities, off-balance sheet items, and managed assets, as well as the transfer of ownership of shares or other securities representing its capital stock, to bridge institutions established for this purpose, with the aim of facilitating their sub - sequent sale. In this case, a bridge institution must be established by Banco de Portugal, with its share capital fully or partially subscribed and paid by the Resolution Fund ( Fundo de Reso- lução ) using its own funds. Thirdly, Banco de Portugal may order the trans - fer of the rights and obligations of a credit insti - tution or a bridge institution, including its assets, liabilities, off-balance sheet items, and managed assets, to asset management vehicles estab - lished for this purpose, with the goal of maximis - ing their value for subsequent sale or liquidation. Additionally, the transfer of the rights and obli - gations of two or more credit institutions within the same group to asset management vehicles may be mandated. These vehicles are created to receive and manage all or part of the rights and obligations of credit institutions under resolution
or a bridge institution. Similarly to bridge institu - tions, the share capital of the asset management vehicle is fully or partially subscribed and paid by the Resolution Fund using its own funds. Fourthly, Banco de Portugal may mandate the application of the internal recapitalisation meas - ure to strengthen the own funds of a credit insti - tution to the extent necessary to enable it to meet the requirements for maintaining its author - isation to operate and to obtain autonomous and sustainable financing from the financial markets. • This is applicable in cases where there is a reasonable prospect that the measure, along with other relevant measures, will achieve the objectives set out in the law and restore the long-term financial stability and viability of the credit institution. The following powers may be applied: (i) partial or total reduction of the nominal value of the liabilities of the credit institution under resolution that do not arise from ownership of own funds instru - ments and that are included within the scope of the internal recapitalisation measure; and (ii) increase in the capital of the credit institu - tion under resolution or its parent company by partially or fully converting the liabilities included within the scope of the internal recapitalisation measure into common shares or securities representing the capital of the credit institution under resolution or its parent company. • Additionally, based on the evaluation carried out by an independent entity, the following is determined in aggregate: (i) the amount of reduction in the nominal value of the liabili - ties included within the scope of the internal recapitalisation measure to ensure that the own funds of the credit institution under resolution are zero; and (ii) the amount of conversion of the liabilities included within
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