Banco de Portugal publishes the 2018 Banking Conduct Supervision Report

In 2018, very substantial amendments to the regulations on the offering of retail banking products and services entered into force in Portugal. These amendments broadened and strengthened bank customers’ rights in regard to a wide range of matters. They also brought new powers to Banco de Portugal as the conduct supervisor, widening its scope of activity to credit intermediation and certification of training entities.

The report's structure was modified from previous years to better explain Banco de Portugal's work over the year, starting with a section on the main developments in banking conduct supervision, followed by a description of activities by banking product and service type, with detailed information on the materials checked and the non-compliance found.

Banking conduct supervision in 2018

Banco de Portugal added the Fees Comparator to the Bank Customer Website, a pioneering initiative in Europe, helping improve the transparency of the information provided to bank customers. The Fees Comparator allows comparison of the maximum fees charged in Portugal for the most representative services associated with payment accounts. It includes information on 93 fees applied by around 200 institutions offering these services.

The legislator decided to assign authorisation, registration and supervision of credit intermediaries to Banco de Portugal. The Bank also began certifying the entities that train employees of credit institutions working in housing and mortgage credit, and the credit intermediaries.

Over the year, Banco de Portugal received 5,329 authorisation requests to carry out credit intermediary activity, of which it approved 924 and rejected 128; it also received seven certification requests from training entities, of which it accepted four. The entities showing interest in operating in credit intermediation were mainly legal persons in the areas of motor vehicle sales (46.3%) and real estate (22.2%) wishing to operate under the responsibility of institutions authorised to grant credit (95.7%), and consumer credit (82%).

Banco de Portugal carried out 1,335 inspections on 123 institutions to assess compliance with the regulatory framework applicable to retail banking markets. Basic bank accounts remained a priority for the supervisor.

In 2018, the national legislator introduced changes that eased access to basic bank accounts. Banco de Portugal required the institutions to strengthen disclosure to their customers about these services. By the end of the year there were 59,173 basic bank accounts, an increase of 32.6% from the end of 2017. During the year, 17,202 accounts were opened; by converting a demand deposit account in 59.6% of cases. To oversee implementation of the changes to the legal framework and compliance with the obligations of disclosure of these services, Banco de Portugal held 560 inspections on 106 institutions.

It also carried out 250 inspections on housing and mortgage credit; 195 on deposit accounts and payment instruments; 169 on consumer credit and 161 on price lists and complaints books.

In consumer credit, Banco de Portugal paid special attention to credit offered through digital channels, given the new challenges that it poses in terms of checking compliance with the legal framework and in regard to bank customer protection. For this, it required that the institutions start reporting information on the consumer credit products whose contracts are begun and completed through digital channels. In this area, the Bank carried out 84 inspections on 13 institutions; it issued 56 recommendations to 10 institutions to correct shortcomings found.

Banco de Portugal also assessed compliance with maximum rates in regard to 1,627,313 consumer credit contracts, 1.6% more than in 2017, having adopted appropriate measures on 196 contracts from one institution.

It monitored 9,739 advertisements on retail banking products and services, 3% more than in 2017; of the advertisements analysed, 2.3% presented irregularities, which the Bank ordered to be corrected.

It also monitored 91 pre-contractual information documents for structured deposits, 54 fewer than in 2017, reflecting a new reduction in supply of this type of product, and checked the calculation of the remuneration on 162 structured deposits due in 2018.

Banco de Portugal received 15,254 complaints from bank customers, a number just below that of 2017.

Deposit accounts, consumer credit and housing and mortgage credit – the most sought-after products – represented 31.5%, 24.8% and 13.0% respectively of the complaints received. Complaints about deposit accounts fell 5.1% on 2017; the charging of fees or commissions was the topic receiving the most complaints in this field, although fewer than the year before. In contrast, complaints about consumer credit increased 10.1%; in this area, the reporting of customers’ credit liabilities was the topic causing the most complaints.

No signs of breaches by the credit institution were detected in 56% of the closed complaints (62% in 2017); in the other 44%, the situation was resolved by the credit institution, on its own initiative or by order of Banco de Portugal. In 2018, Banco de Portugal took 28 days on average to close a complaint, 11 days fewer than the year before.

In retail banking markets supervision, Banco de Portugal issued 922 specific orders and recommendations to 66 institutions and initiated 47 administrative proceedings against 19 institutions.

Most of the orders and recommendations related to housing and mortgage credit (344 orders and recommendations issued to 25 institutions) and consumer credit (301 orders and recommendations addressing 32 institutions). The administrative proceedings related chiefly to deposit accounts (17 proceedings), consumer credit (14 proceedings) and payment services (10 proceedings).

Promoting financial information and training continued to be one of Banco de Portugal's priorities, through its work on the National Plan for Financial Education with the other supervisors. More informed customers tend to be more aware and more demanding, and are in a better position to choose financial products and services that suit their profile and objectives.

In 2018, Banco de Portugal launched a strategy to promote the safe use of digital channels in accessing banking products and services. At the beginning of the academic year, the digital financial education campaign #ficaadica (‘top tip’) went live on the Bank Customer Website and Instagram, designed to show young people how they can protect themselves from possible fraud situations when using the internet and mobile devices; a brochure for distribution in schools was prepared for the purpose. Supported by its network of agencies, Banco de Portugal also organised 449 training initiatives throughout the country, with a total of 14,364 participants.