PORTUGAL Trends and Developments Contributed by: Rodrigo Formigal, João Diogo Barbosa and António Kreiseler de Albuquerque, Abreu Advogados
ESG criteria will also remain a top priority for 2025, with an expected increase in green and sustainability-linked financial products in loan and debt securities (notably bonds with the EU Green Bond Standard becoming effective from 21 December 2024). There are signs of growing demand for sustainability-linked offerings from lenders, investors and other stakeholders and broader society, and thus many, if not the major - ity, of financing arrangements already incorpo - rate sustainability elements. Efforts are being made to incentivise the set- up and investment of loan funds in Portugal. Loan funds’ income is exempt from corporate income tax and stamp duty. Equally, investors in loan funds also benefit from beneficial taxa - tion. These measures reflect a commitment from lawmakers to loan funds that operate or may be interested in operating in Portugal and it is expected that the market will respond appropri - ately from 2025 onwards. Artificial Intelligence and Fintech On the fintech side, innovation has focused mainly on areas such as digital onboarding, pay - ment solutions, robo-advisory, and open bank - ing, fuelled by collaborations between incum - bents and fintech start-ups. Since its creation in 2018, Portugal’s FinLab has contributed to the fostering of innovative projects, in close con - nection with the national regulators. The recent creation of “technology-free zones” ( zonas livres technológicas – ZLTs), the regulatory sandboxes for sponsors to develop and test their technol - ogy-based goods and services, is contributing to the increased dynamism of the Portuguese fintech market. It is anticipated that innovation in fintech will continue to be a key driver in 2025, with new opportunities and innovation-driven models aris -
ing in the banking and financial sectors, namely under the EU’s Digital Finance Package. Furthermore, the Portuguese banking sector has showed interest in implementing artificial intel - ligence as an integral part of the customer rela - tion and financial services. Artificial intelligence technologies are seen as having the potential to revolutionise customer service, credit scoring, fraud detection, decision-making and general automation for the industry. In 2025, the expec - tation is that investments in artificial intelligence in the financial sector will continue to exponen - tially increase to drive beneficial innovation. Restructuring, Recovery and Loan Trading In recent years, the market has been largely driv - en by maturity-driven refinancings and amend- to-extend transactions. On the other hand, secondary market activity has remained slow. As a result of efforts to strengthen their posi - tion since the global financial crisis, Portuguese banks have focused mainly on smaller dispos - als, even as the macroeconomic challenges of 2023 intensified. From a regulatory perspective, great expectation remains for the transposition of the Directive on Credit Servicers and Credit Purchasers, which sets forth a harmonised framework for address- ing NPLs originating in EU banks through the creation of a level playing field secondary mar - ket. The deadline for transposition of this directive was not respected, and as at the time of writing, no local implementation law has been approved or even publicly discussed. Nonetheless, once transposed, servicers will need to obtain an authorisation in their home EU member state, which may be passported to other member states. While originators will need to adopt the
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