Opinion of the European Central Bank of 16 May 2014 on the legal framework for credit institutions and financial companies (CON/2014/34)
Date: 2014-05-16
Institutions: European Central Bank
Subjects: Portugal, banking supervision, company in difficulties, credit institution, financial stability, foreign-exchange reserves, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 16 May 2014 

on the legal framework for credit institutions and financial companies 

(CON/2014/34) 

Introduction and legal basis 

On  5  March  2014,  the  European  Central  Bank  (ECB)  received  a  request  from  the  Portuguese 

Minister  of  State  and  for  Finance  for  an  opinion  on  a  draft  law  (hereinafter  the  ‘draft  law’) 

amending  Decree-Law  No  298/1992  of  31 December 1992  establishing  the  legal  framework  for 
credit  institutions  and  financial  companies  and  other  closely  related  laws  and  decree-laws1 

(hereinafter the ‘legal framework’). 

The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty 

on  the  Functioning  of  the  European  Union  and  on  the  third  and  sixth  indents  of  Article 2(1)  of 
Council Decision 98/415/EC2, as the draft law relates to the Banco de Portugal (BdP) and to rules 

applicable  to  financial  institutions  insofar  as  they  materially  influence  the  stability  of  financial 

institutions  and  markets.  In  accordance  with  the  first  sentence  of  Article 17.5  of  the  Rules  of 

Procedure of the European Central Bank, the Governing Council has adopted this opinion. 

1.  

Purpose of the draft law 

1.1  The  draft  law  introduces  changes  to  the  legal  framework  whose  main  purpose  is  to 
implement  Directive  2013/36/EU  of  the  European  Parliament  and  of  the  Council3  by 

incorporating  the  relevant  provisions  in  the  banking  law,  and  to  effect  changes  and 

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The draft law also amends the following legal acts: Law No 25/2008 of 5 July 2008 establishing measures of a 
preventive  and  repressive  nature  to  combat  money  laundering  of  illicit  origin  and  terrorist  financing  which 
transposes  Directive  2005/60/EC  of  the  European  Parliament  and  of  the  Council  of  26  October  2005  and 
Commission Directive 2006/70/EC of 1 August 2006 on the prevention of the use of the financial system for the 
purpose of money laundering and terrorist financing and amends Law No 52/2003 of 22 August 2003 and repeals 
Law No 11/2004 of 27 March  2004; Law No 28/2009 of 19  June 2009 which reviews the legal framework on 
criminal  and  misdemeanour  penalties  in  the  financial  sector;  Decree-Law  No  260/94  of  22  October  1994 
establishing the legal framework for investment companies; Decree-Law No 72/95 of 15 April 1995 establishing 
the legal framework for financial leasing companies; Decree-Law No 171/95 of 19 July 1995 amending the legal 
framework  for  factoring  companies;  Decree-Law  211/98  of  16  July  1998  regulating  the  activity  of  mutual 
guarantee  companies;  and  Decree-Law  No  317/2009  of  30  October  2009  which  approves  the  legal  framework 
governing the taking up of the business of payment institutions and the provision of payment services.  
Council  Decision  98/415/EC  of  29  June  1998  on  the  consultation  of  the  European  Central  Bank  by  national 
authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 
Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of 
credit institutions and the prudential supervision of credit institutions and investment firms (OJ L 176, 27.6.2013, 
p. 338). 

 
 
 
 
                                                            
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clarifications  to  Portuguese  law  made  necessary  by  Regulation  (EU)  No  575/2013  of  the 
European Parliament and of the Council4. The draft law introduces changes with regard to, 

inter  alia,  capital  buffers,  risk  management,  corporate  governance  and  administrative 

sanctions,  as  required  by  Directive  2013/36/EU.  It  also  proposes  amendments  to  several 

related laws, such as Decree-Law No 317/2009 of 30 October 2009 which approves the legal 

framework governing the taking up of the business of payment institutions and the provision 

of payment services. 

1.2  The draft law also contains amendments to the resolution framework for credit institutions in 

order to clarify some of the provisions of Decree-Law No 31-A/2012 of 10 February 2012, 

which  introduced  a  resolution  regime  into  the  legal  framework  for  credit  institutions  and 

financial  companies.  In  addition  to  the  implementation  of  Directive  2013/36/EU,  the  draft 

law  introduces  the  following  amendments:  (a)  reduction  of  the  list  of  entities  that  are 

considered  as  credit  institutions;  (b)  in-depth  revision  of  the  sanctions  regime;  (c)  express 

introduction  of  the  ‘no  creditor  worse  off  principle’  in  the  resolution  of  credit  institutions, 

which  has  until  now  only  been  implicit;  (d)  reorganisation  of  the  bank  accounts  database 

regarding the disclosure of information to relevant authorities; and (e) revision of the regime 

for  assessing  suitability  of  members  of  the  management  body  and  its  extension  to  key 

function holders. 

2. 

General observations 

The ECB generally welcomes the draft law, which implements Directive 2013/36/EU while 

reflecting the participation of the BdP in the single supervisory mechanism, and clarify the 

‘no  creditor  worse  off  principle’  in  the  current  framework.  It  is  important  that  the 

transposition  into  national  law  of  the  micro-  and  macro-prudential  tools  contained  in 

Directive 2013/36/EU and the implementation of the requirements that fall under the remit of 
the SSM Framework Regulation5 are carried out accurately6. 

3. 

Implementation of Directive 2013/36/EU 

3.1  The  draft  law  revises  the  criteria  and  requirements  for  assessing  the  suitability  of  the 

members of the management body and of the key function holders of a credit institution in 

order to comply with Directive 2013/36/EU and with guidelines from the European Banking 

4  

5  

6  

Regulation  (EU)  No  575/2013  of  the  European  Parliament  and  of  the  Council  of  26  June  2013  on  prudential 
requirements for credit institutions and investment firms (OJ L 176, 27.6.2013, p. 1). 
Regulation  (EU)  No  468/2014  of  the  European  Central  Bank  of  16  April  2014  establishing  the  framework  for 
cooperation  within  the  Single  Supervisory  Mechanism  between  the  European  Central  Bank  and  national 
competent authorities and with national designated authorities (ECB/2014/17), (OJ L 141, 14.5.2014, p. 1). 
Namely the countercyclical capital buffer, minimum risk weights, loss given default floors on exposures secured 
by mortgages, the G-SII buffer and the O-SII buffer. 

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Authority (EBA)7. It also implements the options under Articles 412(5), 413(3), 458(1) and 

493(3)  of  Regulation  (EU)  No  575/2013.  By  these  means,  the  draft  law  helps  promote 

consistency across all participating Member States, thereby helping to ensure a level playing 
field and lowering the risk of regulatory arbitrage8.  

3.2  The draft law also revises the sanctions regime in order to align it with Articles 64 to 72 of 

Directive 2013/36/EU and with the rules laid down in Directive 2005/60/EC of the European 
Parliament and of the Council9 and in Commission Directive 2006/70/EC10. Furthermore, it 

contains  new  and  clearer  rules  regarding  the  disclosure  of  information  relating  to  bank 

accounts  to  certain  entities  in  circumstances  where  exceptions  to  the  obligation  of 
professional secrecy apply11. 

3.3  The  draft  law  provides  that  the  categories  of  entities  to  be  considered  as  credit  institutions 

will be limited to: (a) banks; (b) savings banks; (c) central mutual agricultural credit banks 
and  mutual  agricultural  credit  banks;  (d)  credit  financial  institutions12;  and  (e)  any  other 

undertakings which fulfil the definition of credit institution and are classified as such in the 

law.  

3.4   A new Article 4A lists the investment firms and specifies which of them are subject to the 
legal  framework  and  to  the  prudential  supervision  of  the  BdP13  (dealers,  brokers,  wealth 

management companies, foreign exchange and money market mediating companies). 

3.5  Although the draft law leaves unchanged the definition of ‘credit institution’, it reduces the 

list of entities that  may be considered  as such in Portugal. It removes certain  categories of 

credit institutions that are currently provided for in the banking law but not used in practice 

(e.g.  credit  purchase  financing  companies)  and  classifies  certain  other  categories  of  credit 

institutions  as  ‘financial  companies’  (e.g. 
leasing 
companies, factoring companies)14. The ECB understands that ‘financial companies’ will not 

investment  companies,  financial 

be  authorised  to  accept  deposits  from  the  public  and  will  not  be  subject  to  all  of  the 

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10  

11  
12  

See Articles 30 to 33 and the new Articles 30A to 30D and 31A to 33A of the draft law, and the guidelines on the 
assessment  of  the  suitability  of  members  of  the  management  body  and  key  function  holders,  EBA, 
22 November 2012 (available on the EBA’s website at www.eba.europa.eu). 
See  paragraph  2  of  Opinion  CON/2013/82  and  paragraph  3.1  of  Opinion  CON/2014/21.  All  ECB  opinions  are 
published on the ECB’s website at www.ecb.europa.eu. 

      Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2005 on the prevention of the 
use of the financial system for the purpose of money laundering and terrorist financing (OJ L 309, 25.11.2005, 
p. 15). 
Commission  Directive  2006/70/EC  of  1  August  2006  laying  down  implementing  measures  for  Directive 
2005/60/EC  of  the  European  Parliament  and  of  the  Council  as  regards  the  definition  of  ‘politically  exposed 
person’ and the technical criteria for simplified customer due diligence procedures and for exemption on grounds 
of a financial activity conducted on an occasional or very limited basis (OJ L 214, 4.8.2006, p. 29). 
See Article 81A of the draft law.  
The ECB notes that credit financial institutions will not be permitted to receive deposits from the public, although 
they  will  be  permitted  to  accept  repayable  funds  from  the  public  and  to  engage  in  all  other  usual  banking 
activities. 

13         These were already classified as financial companies and subject to the prudential supervision of the BdP. 
14  

See Articles 3 and 6 of the draft law. 

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prudential provisions laid down in Directive 2013/36/EU and Regulation (EU) No 575/2013, 

and that the BdP will lay down rules specifically applicable to them. 

3.6  The ECB considers that the above might allow financial companies to be more competitive 

by reducing their administrative costs in the context of European regulation. It is confident 

that a level playing field will be preserved, thus safeguarding all of the interests in a well-
functioning banking system and the financial system as a whole15. The relevant authorities 

should,  however,  ensure  that  the  transfer  of  these  institutions,  which  were  previously 

regulated  as  credit  institutions,  to  a  less  onerous  regime  of  prudential  regulation  is  in  line 

with Union law. This is particularly the case if they still fulfil the criteria for authorisation as 

credit institutions. 

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Amendments to the resolution framework  

As mentioned above, the draft law introduces some amendments to the resolution framework 

to  clarify  some  of  its  provisions.  In  particular,  it  introduces  the  ‘no  creditor  worse  off 
principle’16,  which  is  not  expressly  set  out  in  the  current  legal  framework.  The  ECB 

welcomes this amendment as it is an essential core principle of the  European Commission’s 

proposal for a directive on the recovery and resolution of credit institutions and investment 
firms17  (hereinafter  the  ‘proposed  BRRD’).  However,  this  does  not  preclude  the  need  to 

amend more broadly the resolution framework in view of the entry into force of the proposed 

BRRD. 

This opinion will be published on the ECB’s website. 

Done at Frankfurt am Main, 16 May 2014. 

[signed] 

The President of the ECB 

Mario DRAGHI 

15  

16  
17  

Financial companies are allowed to carry on, on a professional basis, the activities of credit institutions referred to 
in  Article  4(1)(b)  to  (i)  and  (q)  to  (s)  of  the  legal  framework  with  the  exception  of  the  consultancy  activities 
referred to in (i). 
See Article 145B(1) and (3) of the draft law and paragraph 3.2 of Opinion CON/2013/87. 
Proposal for a directive of the European Parliament and of the Council establishing a framework for the recovery 
and resolution of credit institutions and investment firms (COM(2012) 280 final). 

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