Press release of Banco de Portugal on the 2017 Banking Conduct Supervision Report

Banco de Portugal publishes today its Banking Conduct Supervision Report. The report describes the regulatory and supervisory activities carried out by Banco de Portugal in retail banking markets in 2017.

The legal framework applicable to the sale of retail banking products and services has undergone important changes, which reinforce the rights of bank customers in a wide variety of areas (mortgage credit, fees, account switching, basic bank accounts, and structured deposits) and increase Banco de Portugal's powers in this field.

In this issue of the report, Banco de Portugal highlights the challenges of the growing digitalisation of financial services and the discussion at international level on this matter, to ensure the protection of bank customers.

Supervision of retail banking markets in 2017

Banco de Portugal carried out more inspections to assess compliance with the rules of conduct of the supervised institutions in consumer credit, payment accounts and services, and basic bank accounts, with a greater number of entities involved and more areas than in the previous year. Over the course of the year Banco de Portugal conducted 147 inspections of the branches of 31 institutions, 95 inspections of the central services of 16 institutions and 632 off-site inspections of 126 institutions. Overall, there were 44 more on-site inspections and 20 more off-site inspections than in 2016.

To assess the transparency and completeness of the information provided in the institutions’ price lists, Banco de Portugal analysed 603 fees and expenses leaflets. It detected irregularities in 185 of the fees and expenses leaflets reported and required their correction.

It assessed 9,501 advertising campaigns for banking products and services, i.e. 11% more than in 2016. Of all the campaigns analysed, 2.1% were non-compliant (2.6% in 2016). Car credit advertising recorded the highest share of non-compliance (11%).

Banco de Portugal checked 145 leaflets on indexed and dual deposits, i.e. 52 fewer than in the previous year, reflecting further contraction of the supply of this type of product. It also analysed the calculation of returns on 187 indexed and dual deposits due over the year.

In addition, it checked compliance with the maximum rates in 1.6 million new consumer credit agreements reported to Banco de Portugal.

Over the course of the year Banco de Portugal received 15,282 bank customer complaints against credit institutions, i.e. 8.1% more than in 2016. There were no signs of infringement in 62% of the complaints closed (64% in 2016); in the other cases the complaint was solved by the institution on its own initiative or on Banco de Portugal’s intervention.

In the wake of its supervisory activities, Banco de Portugal issued 753 specific orders and recommendations to 59 institutions. The most frequent subject matters in these orders and recommendations were consumer credit and basic bank account. 

Within the scope of banking conduct supervision, Banco de Portugal initiated 55 administrative proceedings against 21 institutions. Almost all of these proceedings (98.5%) resulted from the analysis of 131 complaints. The administrative proceedings related mostly to non-compliance associated with deposit accounts (19 proceedings), consumer credit (15 proceedings) and incorrect reporting to Banco de Portugal's Central Credit Register (10 proceedings).

Monitoring of the legal framework of basic bank accounts

Due to their potential for promoting financial inclusion, basic bank accounts were one of the priorities of Banco de Portugal's banking conduct supervision in 2017.

Easier access to basic bank accounts and the growing effort to disseminate this system have resulted in the evolution of the number of basic bank accounts. At the end of 2017 there were 44,618 basic bank accounts, i.e. 27.7% more than in the same period a year earlier. In 2017, 11,992 accounts were opened: around half (50.7%) resulted from the conversion of an already existing demand deposit account.

Following the supervision of this regime's implementation, Banco de Portugal issued 178 specific orders and recommendations addressed to 29 institutions. 

Monitoring of the general arrears regime

In the context of a reduction in household over indebtedness levels, credit institutions initiated 629,850 new procedures under the out-of-court arrears settlement procedure (OASP), i.e. 12.3% less than in the previous year. Of the new proceedings, 96,387 concerned mortgage credit agreements and 533,463 consumer credit agreements.

In mortgage credit, most OASP proceedings closed in 2017 (63.7%) led to the settlement of arrears. In consumer credit, 45.5% of OASP proceedings were concluded with the settlement of arrears. The renegotiation of credit agreements' terms and conditions continued to be the main solution agreed between institutions and their customers.

As a result of its supervision of the implementation of the general arrears regime, Banco de Portugal issued 13 specific orders addressed to 9 institutions to correct the irregularities detected and initiated 8 administrative proceedings against 6 institutions.

Financial education and information

In 2017 Banco de Portugal revamped its Portal do Cliente Bancário (bank customer website – in Portuguese only) to render the information it provides to the public on retail banking products and services more accessible and understandable.

With the support of its branch and its network of agencies, Banco de Portugal organised 375 financial education training sessions, with 12,577 participants.

It also participated in the National Plan for Financial Education, promoting it under the aegis of the National Council of Financial Supervisors, jointly with the other supervisors and a wide-ranging group of partners.

Banco de Portugal organised the third meeting of the Portuguese-speaking central banks on financial inclusion and education, where it signed a protocol between these central banks and the Alliance for Financial Inclusion (AFI) and participated actively in international fora on financial inclusion and education.