PORTUGAL Law and Practice Contributed by: Pedro Cassiano Santos, Francisca César Machado, Chen Chen and Natalia Fedorova, VdA
Deposits in Case of an Insolvency The general credit privilege applies to most deposits (with a few exceptions), placing it above unsecured senior creditors of a credit institution.
the scope of the internal recapitalisation measure into capital, through the issuance of common shares or securities representing the capital, to achieve a Common Equity Tier 1 (CET1) ratio of the credit institution under resolution or the bridge institution that allows it to maintain its authorisation to operate for at least one year and to obtain autonomous and sustainable financing from the financial markets. • Lastly, Banco de Portugal applies the internal recapitalisation measure in accordance with the hierarchy of claims in insolvency. The nominal value of a class of liabilities cannot be reduced, nor can a class of liabilities be converted into capital, until those powers have been exercised in relation to the hierar - chically lower classes of liabilities, as per that hierarchy. • With the implementation of this measure, the management body of the credit institution under resolution must prepare and submit a business reorganisation plan to Banco de Portugal within 30 days of the measure’s application. This plan should include the fol - lowing elements: (i) a detailed diagnosis of the factors, circumstances, and issues that led the credit institution under resolution to the risk or situation of insolvency; (ii) a descrip - tion of the measures aimed at restoring the long-term viability of the credit institution under resolution, or of part of its activities, within an appropriate timeframe, which may include reorganising its activities; introducing changes to its operational systems and inter - nal infrastructure; cessation of loss-making activities; restructuring existing activities that can be made competitive; and the disposal of assets or business lines; and (iii) the timeline for implementing these measures.
9. ESG 9.1 ESG Requirements
Environmental, social and corporate governance (ESG) aspects are mainly regulated by European legislation and by soft law instruments. At pre - sent, there is a very board array of ESG legisla - tion applicable to credit institutions. In 2024, we have witnessed a crucial legislative change in the banking sector with the introduc - tion of Regulation (EU) 2024/1623 of the Europe - an Parliament and of the Council of 31 May 2024, amending Regulation (EU) No 575/2013, regard - ing requirements for credit risk, credit valuation adjustment risk, operational risk, market risk, and the output floor. This Regulation, which will be applicable from 1 January 2025, will amend Article 449a of the CRR. Consequently, all insti - tutions will be required to disclose information on ESG-related risks, distinguishing between environmental, social, and governance risks, as well as physical and transition risks with respect to environmental risks. Previously, this require - ment was only applicable to large institutions that had issued securities admitted to trading on a regulated market of any EU member state. Portuguese credit institutions are already adapt - ing internally to be prepared for the implementa - tion of this new obligation. The requirements for climate risk management in banks are mainly derived from the ECB’s Guide on climate-related and environmental risks, pub - lished in November 2020. Although this Guide is a soft law instrument, it outlines the ECB’s
503 CHAMBERS.COM
Powered by FlippingBook