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13 March 2009
The ongoing financial downturn has kept Portugal's legislature busy in the final quarter of 2008 and at the start of 2009.
One of the first legislative reactions to the problems in the banking sector was Ordinance 1219-A/2008, which was issued on October 23 2008. It created a special temporary state guarantee regime to enable Portuguese credit institutions to obtain financing or refinancing in the present unstable market. The regime will expire on December 31 2009. Several banks have already used state guarantees in their financing operations.
On November 3 2008 Legislative Decree 211-A/2008 introduced two particularly significant counter-crisis measures.
First, it raised the maximum compensation payable under the bank deposit guarantee scheme from €25,000 to €100,000 until December 31 2011. It also stipulated that bank customers must be paid a first instalment of at least €10,000 within seven days of bringing a claim under the scheme. Second, it extended the rule-making, investigatory and enforcement powers of the financial regulators(1) in special circumstances.
On November 24 2008 Law 63-A/2008 introduced new provisions relating to capital adequacy. The law sets out the conditions for the capitalization of credit institutions that receive assistance from public funds. In order to qualify for government assistance in their capitalization operations, credit institutions must have a head office in Portugal and must conduct such operations using instruments that are eligible for inclusion in Tier 1 capital - that is, through mechanisms such as capital increases or share buy-backs. The state can then participate in such capitalization operations (eg, through the subscription of ordinary or preference shares or debt instruments issued to finance other capitalization operations).
The government and the Bank of Portugal have also taken a number of other measures in recent months. In November 2008 the government announced the nationalization of the Banco Português de Negócios SA and the Bank of Portugal ordered Banco Privado Português SA to prepare a recovery plan to counteract its financial difficulties. In December 1 2008 the Bank of Portugal reinforced its control of Banco Privado Português by appointing four interim directors to its board, and a fifth interim director has recently been appointed following the suspension of the remaining board members that had not been appointed by the Bank of Portugal.
For further information on this topic please contact Manuel Magalhães or Francisco Mendes Correia at Cuatrecasas Gonçalves Pereira by telephone (+351 21 355 3800) or by fax (+351 21 353 2362) or by email (firstname.lastname@example.org or email@example.com).
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Francisco Mendes Correia