PORTUGAL Law and Practice Contributed by: Pedro Cassiano Santos, Francisca César Machado, Chen Chen and Natalia Fedorova, VdA
11. Horizon Scanning 11.1 Regulatory Developments Introduction
prepare a report covering information from the 2024 financial year. Digital Operational Resilience Act (DORA) DORA will be applicable from 17 January 2025 and Portuguese credit institutions will need to adapt to its requirements. Capital Requirements Regulation (CRR) III and Capital Requirements Directive (CRV) VI CRR III and CRD VI introduce significant changes with a view to implementing the remaining ele - ments of the Basel III regulatory reforms, which the European Union (EU) has mostly adopted. Key aspects include a new regulatory framework for non-EU banks to harmonise EU supervision, requirements for managing ESG-related risks, revised methods for calculating risk-weighted assets, with an emphasis on standardised cal - culations, and the introduction of an “output floor” to ensure minimum capital requirements for banks using internal models. Moreover, they mandate more detailed fit and proper tests for senior bank managers, ensur - ing harmonised vetting processes before they assume their roles, and extend the supervisory powers of competent authorities. This includes the oversight of credit institution acquisitions, significant asset or liability transfers, and merg - ers or divisions. These initiatives aim to align bank risk management and capital requirements with broader sustainability and regulatory goals within the EU. Anti-Money Laundering and Counter-Terrorist Financing: AMLD6 and AML Regulation Directive (EU) 2024/1640 of the European Par - liament and of the Council of 31 May 2024 on the mechanisms to be put in place by member states for the prevention of the use of the finan - cial system for the purposes of money launder -
According to the European Commission (in its In-Depth Review 2024 Portugal of April 2024), “Portuguese banks improved their resilience in 2023 as higher net interest income boosted their profitability, without materially impacting their asset quality. Banks’ profit margins increased substantially over 2023 as the large share of variable rate loans yielded higher returns on the back of higher Euribor and key ECB interest rates, while deposit costs remained moderate. These further improved banks’ return on equity, to 10.6% in the first three quarters of 2023, the highest level since the financial crisis and above the euro area average. Portuguese banks used part of these profits to strengthen their capital positions, increasing their CET1 capital ratio by 104 basis points over the first three quarters of 2023 to 16.4%”. This is positive news, and the Portuguese economy (and banking sector) is It is expected that the Taxonomy Regulation will eventually cover social matters, as the Sustaina - ble Finance Disclosure Regulation already does. In addition, as referred above, the “new” Article 449a of the Capital Requirements Regulation will be applicable from 1 January 2025 and all Portuguese credit institutions will be required to disclose information on ESG-related risks, dis - tinguishing between environmental, social, and governance risks, as well as physical and tran - sition risks with respect to environmental risks. The Corporate Sustainability Reporting Directive will also be transposed to the Portuguese legal order and in 2025 credit institutions will need to expected to continue growing. ESG Regulatory Development
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