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ANNUAL REPORT
ACTIVITIES AND FINANCIAL STATEMENTS
2011
Lisbon, 2012
www.bportugal.pt Banco de Portugal E U R O S Y S T E M
BANCO DE PORTUGAL
Av. Almirante Reis, 71
1150-012 Lisboa
www.bportugal.pt
Edition
Offi ce of the Governor
Accounting Department
Design and Distribution
Administrative Services Department
Documentation, Editing and Museum Division
Editing and Publishing Unit
Number of copies
120
ISBN 978-989-678-019-7 (print)
ISBN 978-989-678-020-3 (on-line)
ISSN 0870-0060 (print)
ISSN 1646-5083 (on-line)
Legal Deposit no 228137/05
CONTENTS
MANAGEMENT OF THE BANK
HEADS OF DEPARTMENT, REGIONAL DELEGATIONS AND DISTRICT AGENCIES
I. ACTIVITIES IN 2011
19 INTRODUCTION
23 1. FINANCIAL STABILITY WITHIN THE EUROPEAN CONTEXT
23 1.1. Economic and Financial Assistance Programme
24 1.1.1. Strengthening the banks’ capital base
24 1.1.2. Liquidity in the banking system
25 1.1.3. Strengthening banking sector monitoring and supervision
26 1.1.4. Improvement of the regulatory framework under EFAP
27 1.2. Macro-supervision of the fi nancial system
29 1.3. Prudential supervision
29 1.3.1. Improved regulatory framework for supervision
31 1.3.2. Enhanced effectiveness of the supervisory activity
34 1.4. Banking conduct supervision
34 1.4.1. Improved regulatory framework for supervision
34 1.4.2. Enhanced effectiveness of the supervisory activity
35 1.4.3. Recommendations and specifi c orders
35 1.4.4. Promoting fi nancial information and literacy
36 1.5. Legal enforcement
36 1.5.1. Prevention of money laundering and terrorist fi nancing
37 1.5.2. Banking perimeter protection
37 1.5.3. Non-sanctioning institutional intervention
37 1.5.4. Administrative proceedings
39 1.6. Deposit guarantee fund management
39 1.7. Payment systems
40 1.7.1. Enhancement of payment systems oversight
41 1.7.2. Effective and reliable operation of TARGET2
43 1.8. International representation and institutional cooperation
44 1.8.1. Activity within the Economic and Financial Assistance Programme
44 1.8.2. Activity within the European System of Financial Supervisors
45 1.8.3. Activity within the framework of the ESCB
46 1.8.4. Participation in other multi-lateral forums
46 1.8.5. International cooperation with other supervisory authorities
47 1.8.6. Cooperation with other national authorities
50 2. EFFECTIVE AND FULLY-FLEDGED CONTRIBUTION TO THE
BANK’S FUNCTIONS AS MONETARY AUTHORITY WITHIN THE
FRAMEWORK OF THE EUROSYSTEM
50 2.1. Economic research and advice
51 2.2. Monetary policy implementation
53 2.3. Asset management
53 2.3.1. ECB’s foreign reserve management
53 2.3.2. Management of the Bank’s own investment assets
54 2.4. Statistics and reporting
55 2.5. Payment systems
55 2.5.1. Retail payment systems in SICOI
57 2.5.2. Developments in the TARGET2-Securities system
57 2.5.3. Implementation of SEPA in Portugal
58 2.5.4. Management of the List of Cheque Defaulters and the use of cheques
59 2.6. Currency issuance
59 2.6.1. Production of euro banknotes
59 2.6.2. Banknote sorting at Banco de Portugal
61 2.6.3. Detection of counterfeit banknotes and coins
62 2.6.4. Common framework for euro banknote recycling
63 2.6.5. Roadmap for greater convergence of NCB cash services
64 2.6.6. Project for the creation of a second series of euro banknotes
64 2.7. International relations and cooperation
66 3. ORGANISATION AND EFFICIENT MANAGEMENT OF RESOURCES
66 3.1. Institutional model and external audit
66 3.2. Internal governance and risk management
67 3.2.1. Organisational structure of Banco de Portugal
68 3.2.2. Operational risk management and Business Continuity Plan
68 3.2.3. Internal audit
69 3.2.4. Principles of integrity and ethical value
69 3.3. Information and communication systems
71 3.4. Human resource management
71 3.4.1. Staff composition
74 3.4.2. Compensation and benefi ts policy
75 3.4.3. Human resource development policies
76 3.5. Budget and building management
76 3.5.1. Budget management
77 3.5.2. Building management and security
78 4. COMMUNICATION AND SUPPLY OF SERVICES TO THE COMMUNITY
78 4.1. Communication model based on transparency and accuracy
78 4.1.1. Communication with the public
82 4.1.2. Interaction with the fi nancial community
84 4.1.3. Cooperation with Portuguese and international entities
85 4.2. Optimisation of information produced and disseminated
85 4.2.1. Economic information
86 4.2.2. Statistical information
88 4.3. Promoting social responsibility and environmental sustainability
ANNEXES TO CHAPTER 2
93 A.2.1. Economic research and advice
93 Table 1- International institutional representation of Banco de Portugal in 2011
101 Table 2- Presentations at seminars and conferences
105 A.2.6. Currency issuance
105 Banknotes
111 Coins
II. FINANCIAL STATEMENTS
119 1. PRESENTATION
119 1.1. Developments in the composition of the balance sheet
127 1.2. Developments in the profi t and loss account
132 2. FINANCIAL STATEMENTS
135 3. NOTES ON THE FINANCIAL STATEMENTS
175 4. EXTERNAL AUDITORS’ REPORT
177 5. REPORT AND OPINION OF THE BOARD OF AUDITORS
MANAGEMENT OF THE BANK
9
Man
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GOVERNOR
Carlos da Silva Costa
BOARD OF DIRECTORS
Governor
Carlos da Silva Costa
Vice-Governors
Pedro Miguel de Seabra Duarte Neves
José Joaquim Berberan e Santos Ramalho1
Directors
José António da Silveira Godinho
Maria Teodora Osório Pereira Cardoso2
João José Amaral Tomaz3
1 Appointed by Resolution of the Council of Ministers No 16/2011 of 16 September, published in the Offi cial Gazette (Series II) No 176 of 13 September 2011.
2 Appointed Chairman of the Senior Board of the Fiscal Policy Council by Resolution of the Council of Ministers No 1/2012 of 22 December 2011, published in the Offi cial Gazette (Series II) No 14 of 19 January 2012, having taken offi ce on 16 February 2012.
3 Appointed by Resolution of the Council of Ministers No 16/2011 of 16 September, published in the Offi cial Gazette (Series II) No 176 of 13 September 2011.
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BOARD OF AUDITORS
Chairman
Emílio Rui da Veiga Peixoto Vilar
Members
Rui José Conceição Nunes
Amável Alberto Freixo Calhau
ADVISORY BOARD
Carlos da Silva Costa
Pedro Miguel de Seabra Duarte Neves
José Joaquim Berberan e Santos Ramalho
Manuel Jacinto Nunes
José da Silva Lopes
Vítor Manuel Ribeiro Constâncio
José Alberto Vasconcelos Tavares Moreira
Luís Miguel Couceiro Pizarro Beleza
António José Fernandes de Sousa
Emílio Rui da Veiga Peixoto Vilar
Valentim Xavier Pintado
Almerindo da Silva Marques
Alberto Manuel Sarmento Azevedo Soares
Roberto de Sousa Rocha Amaral
Rui Manuel Teixeira Gonçalves
HEADS OF DEPARTMENT,
REGIONAL DELEGATIONS AND
DISTRICT AGENCIES
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Hea
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Offi ce of the Governor (GAB)
Paulo Ernesto Carvalho Amorim
Secretariat to the Boards (SEC)
Paulo Ernesto Carvalho Amorim
Audit Department (DAU)
Francisco Martins da Rocha
Legal Enforcement Department (DAS)
José da Cunha Nunes Pereira
Accounting Department (DCC)
José Pedro Silva Ferreira
Issue and Treasury Department (DET)
António Pinto Pereira
Statistics Department (DDE)
João António Cadete de Matos
Economics and Research Department (DEE)
Ana Cristina de Sousa Leal
Human Resources Department (DRH)
António Manuel Marques Garcia
Markets and Reserve Management Department (DMR)
Rui Manuel Franco Rodrigues Carvalho
Organisation and Information Technology Department (DOI)
António Jacinto S. Nunes Marques
International Relations Department (DRI)
Nuno Homem Leal de Faria
Administrative Services Department (DSA)
Eugénio Fernandes Gaspar
Legal Services Department (DJU)
José Gabriel Cortez Rodrigues Queiró
Payment Systems Department (DPG)
Jorge Manuel Egrejas Francisco4
Banking Conduct Supervision Department (DSC)
Maria Lúcia de Almeida Leitão
Banking Prudential Supervision Department (DSP)
Vasco Manuel da Silva Pereira
OPORTO BRANCH
Manuel Maia Marques
REGIONAL DELEGATIONS
Regional Delegation of the Azores
Ibéria Maria de Medeiros Cabral Serpa
Regional Delegation of Madeira
Maria Heliodora Vieira Geraldes Matos
DISTRICT AGENCIES
Braga
Fernanda da Conceição C. Carvalho Barros
Castelo Branco
Rui António da Silva Santa Rajado
Coimbra
Maria João Botelho Simões Raposo de Sousa
Évora
Paulo Ruben Alvernaz Rodrigues
Faro
Victor Manuel Geraldes Ribeiro
Viseu
Gentil Pedrinho Amado
4 Acting Head of Department as of 6 July 2011.
IACTIVITIES IN 2011
1. FINANCIAL STABILITY WITHIN THE EUROPEAN CONTEXT
2. EFFECTIVE AND FULLY-FLEDGED CONTRIBUTION
TO THE BANK’S FUNCTIONS AS MONETARY AUTHORITY
WITHIN THE FRAMEWORK OF THE EUROSYSTEM
3. ORGANISATION AND EFFICIENT MANAGEMENT OF RESOURCES
4. COMMUNICATION AND SUPPLY OF SERVICES TO THE COMMUNITY
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INTRODUCTION
In 2011 Banco de Portugal carried out its activity in a particularly diffi cult and demanding environment.
Four years after the global crisis began, signifi cant imbalances persist in the world economy, budget
positions remain fragile in various advanced economies and fi nancial market conditions are deteriorating
again, in a context of a deepening sovereign debt crisis in the euro area. Ireland and Portugal lost access
to the capital markets and had to resort to international fi nancial assistance, as Greece had done in 2010.
During the year, the European authorities adopted various measures in response to the crisis, not only
in order to contain short-term fi nancial risks, but also to provide a lasting response to the need for a
stronger economic governance model in the euro area and for mechanisms that ensure the monetary
union’s fi nancial stability. These decisions culminated in 2012 in the intergovernmental agreement reached
by the Heads of State or Government of the euro area on a new Treaty on Stability, Coordination and
Governance in the Economic and Monetary Union. Also signifi cant from an institutional viewpoint was
the new European architecture for fi nancial supervision, which came into force in 2011 and comprises
the European Systemic Risk Board (ESRB), to deal with macro-prudential matters, and the European
Supervisory Authorities (ESAs) to deal with prudential and market conduct matters in the banking,
insurance and stock market sectors.
In this context, Banco de Portugal embarked on a strategic planning exercise at the start of 2011, from
which four broad strategic guidelines for 2011-2013 emerged:5
• Financial stability within the European context;
• Effective and fully-fl edged contribution to the Banks’ functions as monetary authority within the
framework of the Eurosystem;
• Organisation and effi cient management of resources;
• Communication and supply of services to the community.
Financial stability within the European context
In terms of fi nancial stability, the priorities are to implement the Economic and Financial Assistance
Programme (EFAP) measures that lie within Banco de Portugal’s responsibilities; to strengthen the effec-
tiveness of the fi nancial system’s regulation and supervision in its various aspects (macro-prudential,
prudential and market conduct); to promote the smooth operation of the payment systems; and to work
proactively in international representation and cooperation with the other national fi nancial supervisors.
Banco de Portugal’s strategy for fi nancial stability is based on four pillars:
• To strengthen the banks’ capital base;
• To ensure liquidity in the banking system;
• To strengthen monitoring of the banking sector;
• To improve the regulatory framework.
The year 2011 saw marked progress across all these areas. Capitalisation levels in the banking system
improved substantially, continuing the trend seen since 2008. In parallel, banks continued to deleve-
rage, leading to a substantial reduction in the loan-to-deposit ratio. Transparency in the banking system
was boosted signifi cantly by a large quality inspection programme on the banks’ assets, which involved
contributions from external auditors and international partners; by the introduction of a new credit risk
indicator, aligned with international standards; and by improved statistical reporting on the indebtedness
of private individuals and companies. The regulatory framework was greatly improved with the approval
of legislation governing banks’ access to public funds, early intervention, resolution, the winding-up of
credit institutions and the deposit guarantee scheme.
5 See Box 1 ‘Strategic planning 2011-2013’.
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The strategy for safeguarding fi nancial stability involves bolstering fi nancial education as a key element
in preventing bank customers from taking on excessive risks and in increasing effi ciency in the fi nancial
system. In fi nancial literacy, the work undertaken has led in particular to the approval of the National Plan
for Financial Education, a joint initiative of Banco de Portugal and the other national fi nancial supervisors,
under the coordination of the National Council of Financial Supervisors.
Effective and fully-fl edged contribution to the Bank’s functions as monetary authority within
the framework of the Eurosystem
Banco de Portugal worked with commitment and fulfi lled the objectives set in regard to contributing
effectively to its functions as monetary authority within the framework of the Eurosystem in 2011. That
included the following: economic research and advice, implementation of monetary policy, management
of offi cial foreign reserves and gold, payment systems, currency issuance, statistics and reporting duties,
and international relations and cooperation, especially with Portuguese-speaking countries.
Banco de Portugal’s key activities in the fi elds of economic research and advice and operational functions
included its participation in the Eurosystem’s monetary policy decision-making process, in a year marked
by a particularly adverse situation in Portugal and abroad. The Bank took an active role in defi ning
non-standard policy measures and monitoring resident institutions’ liquidity situations, with particular
involvement in the plans to reduce the need for fi nancing from the Eurosystem, thereby ensuring a
gradual and orderly deleveraging process.
In statistics, important exercises were carried out in response to the new information requirements
identifi ed in EFAP. Key to this response was the interconnection of the data contained in the Central
Balance-Sheet Database, the Central Credit Register and the Securities Statistics Integrated System.
Banco de Portugal also made notable progress in its cooperation activity in 2011, broadening its geogra-
phical reach and the subject areas of cooperation, to encompass all the Portuguese-speaking world
(including Brazil) and covering other key areas in greater depth, such as supervision and accounting.
Organisation and effi cient management of the Bank’s resources
Banco de Portugal’s priorities in organising and managing its resources are: the strengthening of its internal
organisational model, continuous improvement of the business and management processes and of the
available technological means and improvement and motivation of the Bank’s staff. In 2011 the Bank
made various adjustments to its internal structure and processes, to increase operational effectiveness
and incorporate best practice.
In the fi eld of internal governance, the supervisory functions were reorganised, leading to the creation
of three distinct departments, corresponding to prudential supervision, market conduct supervision and
legal enforcement.
To strengthen the principles of integrity and ethical values, the fi gure of the Ethics Adviser was created.
As far as processes are concerned, Banco de Portugal has placed increasing importance on operational
risk management, in order to prevent the occurrence of events that could seriously harm its fi nancial
situation, its image and reputation, or its ability to achieve its goals.
In the IT systems area, aside from various cross-cutting projects aiming essentially to improve effi ciency in
communication and to upgrade the document management system, the Bank executed various projects
to address the growing needs relating to the treatment of data in the areas of prudential supervision,
statistics and payment systems.
Human resource management continued to focus on providing a specialised team capable of respon-
ding on a sustainable basis to the new challenges and responsibilities entrusted to Banco de Portugal,
especially in supervision and regulation of the fi nancial system. Naturally, Banco de Portugal is aware of
21
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the diffi cult context facing Portuguese society. For this reason, in 2011, the Board of Directors of Banco
de Portugal decided, autonomously and as a gesture of solidarity, to join the effort that the country is
making, adopting compensation containment measures resulting in an overall saving equivalent to that
of the measures defi ned in the 2011 State Budget Law. These compensation containment measures,
along with other rationalisation drives across the institution in 2011, led to a signifi cant reduction in
staff costs and supplies and services from third parties.
Communication and supply of services to the community
In the area of communication and supply of services to the community, Banco de Portugal’s strategic
goals include a policy of communicating transparently and rigorously with the fi nancial community
and other domestic and international entities, with the media and society in general. Alongside these
goals, the Bank aims to optimise the services provided to the community, in particular in its provision of
economic and statistical information. In its relations with the community, the Bank places importance
on promoting social responsibility and environmental sustainability, two areas in which certain initiatives
took place during 2011.
In external communication, Banco de Portugal favoured use of its websites. The Bank’s institutional site
sets out its organisation, mission, functions and activities and also publishes the corresponding press
releases and public speeches. The Bank Customer Website is a space dedicated to giving information
to bank customers, offering fi nancial education and services to the public. Both sites were redesigned
and enlarged, following signifi cant increases in visitor numbers since 2010. The institutional site grew
15% and the Bank Customer Website around 13%. The Bank’s commitment to promoting transparency
and greater interaction with the community is also refl ected in the number of press releases and public
speeches made in various Portuguese and foreign forums, which grew around 30% versus 2010.
The following sections are organised around the four broad strategic guidelines and describe in more
detail the main initiatives and activities implemented by Banco de Portugal during 2011.
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BOX 1 | STRATEGIC PLANNING 2011-2013
Strategic Guideline 1: Financial stability within the European context
• To contribute to execution of the measures defi ned in the Economic and Financial Assistance Programme;
• To strengthen Banco de Portugal’s qualifi cations and improve the effectiveness of its organisation
and the instruments used in regulating and supervising the fi nancial system;
• To ensure proactive collaboration with the colleges of supervisors and international representation;
• To implement the TARGET2-Securities system and ensure good operation of the TARGET2-PT system;
• To improve oversight of payment systems.
Strategic Guideline 2: Effective and fully-fl edged contribution to the Bank’s functions as
monetary authority within the framework of the Eurosystem
• To maintain excellence levels in executing monetary policy;
• To strengthen the Bank’s active participation in the European System of Central Banks (ESCB) and
other bodies at European level;
• To optimise management of assets and reserves;
• To promote improvements in the payment systems’ effi ciency and transparency and correct imple-
mentation of SEPA;
• To optimise the use of micro databases as part of integrating the statistics IT systems;
• To ensure effi cient, high-quality banking services to professional cash-handlers;
• To ensure implementation of the changes to the recirculation schemes for euro banknotes and coins;
• To take part in the launch project for the second series of euro banknotes;
• To encourage international cooperation, in particular with Portuguese-speaking countries.
Strategic Guideline 3: Organisation and effi cient management of the Bank’s resources
• To improve/implement the overall operational effi ciency, cost control, risk management, internal
control and internal governance processes;
• To ensure the development and improvement of the IT systems, responding effi ciently to the new
operational requirements;
• To simplify, modernise and optimise management and administrative processes for human resources,
improving forecasting management;
• To align the compensation and benefi ts policy with the Bank’s current operational situation;
• To respond to new information requirements, improving the information from the accounting system;
• To provide and improve the quality of the services made available to users and to offer excellent service;
• To defi ne a physical security policy;
• To maintain a high level of solvency in the Pension Fundo.
Strategic Guideline 4: Communication and supply of services to the community
• To develop a structured communication policy both internally and externally;
• To strengthen accountability and transparency in carrying out the Bank’s functions;
• To increase functional and institutional cooperation with the banking system, professional operators,
public organisations and the community at large;
• To open the Money Museum, with the aim of improving understanding of the history of money
and its relationship with societies and the individual;
• To bring the Historical Archive to a wider audience;
• To promote social responsibility and environmental sustainability policie.
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1. FINANCIAL STABILITY WITHIN THE EUROPEAN CONTEXT
Financial stability is, alongside price stability, a key element of Banco de Portugal’s mandate. The
Bank has broad powers in the areas of macro-prudential supervision, prudential and banking conduct
regulation and supervision, legal enforcement and oversight of the payment systems. In addition, the
Bank collaborates with the domestic and international entities with responsibility in these areas. Therefore
it is no surprise that fi nancial stability within the European context constitutes the fi rst broad strategic
guideline defi ned for 2011-2013.
In 2011 the Bank’s activities in this fi eld were marked by the entering into force of the European Union’s
new institutional architecture for fi nancial supervision, by the intensifi cation of the sovereign debt crisis
in the euro area and by the approval of the Economic and Financial Assistance Programme (EFAP) to
Portugal, which places fi nancial stability among the three fundamental pillars of the Portuguese economy’s
adjustment.
The Bank’s key goals for fi nancial stability were defi ned for the three-year period from 2011 to 2013:
fulfi lment of EFAP measures lying within Banco de Portugal’s remit, the increased effectiveness of
regulation and supervision of the fi nancial system in its various aspects, the promotion of the smooth
operation of the payment systems and proactive work in international representation and cooperation
with the other Portuguese fi nancial supervisors. The following subsections set out the activity carried
out in 2011 in response to these objectives.
1.1. ECONOMIC AND FINANCIAL ASSISTANCE PROGRAMME
The Economic and Financial Assistance Programme (EFAP) was agreed in May 2011 with the European
Union6 (EU) and the International Monetary Fund (IMF), following a request made by the Portuguese
authorities for international fi nancial assistance. The total amount of fi nancing will be EUR 78 billion for
the period from 2011 to 2014.7 The programme defi nes a broad set of measures and actions to be taken
by the Portuguese authorities and identifi es the lasting consolidation of the public accounts, fi nancial
stability and the structural transformation of the Portuguese economy as the three fundamental pillars
to restore fi nancial markets’ confi dence and promote sustained growth.8
Regarding the fi nancial system, the programme deepened the strategy that Banco de Portugal was already
following to ensure the fi nancial system’s stability, without jeopardising the fi nancing of the economy’s
more productive sectors. This strategy addresses four concerns:
• Strengthen the banks’ capital base;
• Ensure liquidity in the banking system;
• Strengthen monitoring of the banking sector;
• Improve the regulatory framework, most notably regarding early intervention, resolution,
winding-up and deposit guarantees.
6 The programme’s conditions are defi ned in the Letter of Intent from the Minister of State and Finance and the Governor of Banco de Portugal to representatives of the Council of the European Union, the Eurogroup, the European Commission, the European Central Bank and the International Monetary Fund, as well as the memoranda of understanding agreed respectively with the European Commission and the International Monetary Fund. The relevant documentation can be consulted at http://www.bportugal.pt/en-US/OBancoeoEurosistema/ProgramaApoioEconomicoFinanceiro/Pages/default.aspx.
7 Of this amount, EUR 52 billion corresponds to assistance requested from the European Financial Stability Mechanism (EFSM) and the European Financial Stability Facility (EFSF), i.e. the EU share of the Programme, and EUR 26 billion corresponds to assistance requested from the IMF, under an Extended Fund Facility (EFF).
8 The programme’s fi rst review missions took place in August and November 2011. Following generally positive assessments from the international institutions regarding implementation of the measures defi ned in the programme’s various work-fronts, the disburse-ments of the next fi nancial assistance tranches were approved. Thus, EUR 36.5 billion was received by January 2012: EUR 15.6 billion from the EFSM, EUR 7.3 billion from the EFSF and EUR 13.6 billion from the IMF.
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1.1.1. Strengthening the banks’ capital base
Prior to the programme, Banco de Portugal’s guidelines already envisaged a gradual and orderly
deleveraging of the Portuguese fi nancial system and the increase of banks’ own funds, both through
retained earnings and the strengthening of regulatory capital. In this context, in April 2011, the Bank
required fi nancial institutions to reach a minimum Core Tier 1 ratio of 8% by the end of that year. EFAP
strengthened the latter goal, increasing the minimum Core Tier 1 ratio to 9% by end-2011 and 10% by
end-2012. These requirements were set out in Notice of Banco de Portugal No 3/2011 of 10 May 2011.
The programme also foresees a Bank Solvency Support Facility, amounting to EUR 12 billion, to support
viable banks’ solvency where recapitalisation is impossible through market-based solutions.
To accommodate this new mechanism, the legal framework governing banks’ access to public capital was
amended, with the involvement of Banco de Portugal, as defi ned by Law No 63-A/2008 of 24 November
2008. The law introducing this change, published in 2012 (Law No 4/2012 of 11 January 2012), states
that the recapitalisation of the banks through public funds may only take place as a supplementary
measure and a solution of last resort. The goal is to safeguard the stability of the fi nancial system, when
market conditions do not allow raising of private capital in good time to provide the capital increases
needed to fulfi l the required own funds ratios. The State’s interests are safeguarded in particular by the
provisions defi ning the requirement to prove the benefi ciary institution’s viability, the temporary nature
of the public investment and an appropriate return from that investment. Furthermore, the law aimed to
preserve effi ciency, by minimising State intervention in the day-to-day management of the institutions.
The recapitalisation process is monitored using funding and capital plans that the banking groups submit
to Banco de Portugal quarterly.
1.1.2. Liquidity in the banking system
Another priority for EFAP is the reduction of bank fi nancing from the Eurosystem within the programme’s
time horizon and the need for the banks to achieve a more stable medium-term fi nancing structure. Under
this, the funding and capital plans presented by the eight largest banking groups must be consistent
with an indicative loan-to-deposit ratio of around 120% at the end of 2014.
The deleveraging process is controlled through the quarterly reporting of the funding and capital plans
by the eight largest banking groups until 2015. The aim is to ensure that the measures defi ned lead to
an orderly deleveraging and do not jeopardise the fi nancial stability of the banks themselves and suitable
fi nancing of the economy.
The programme contains measures to ensure the banking system has the liquidity needed, including
strengthening the assets available as collateral and issuing bonds with a State guarantee (Government-
-Guaranteed Bank Bonds) up to a total of EUR 35 billion. In 2011 Banco de Portugal assessed various
State-backed loan operations, with the guarantees granted totalling EUR 11.825 billion.
In December 2011, the Governing Council of the European Central Bank decided that the national central
banks (NCBs) may accept additional credit claims that satisfy specifi c eligibility criteria as collateral in
Eurosystem credit operations. In 2012 the Governing Council of the ECB approved Banco de Portugal’s
specifi c measures in this area.9
9 Veja-se o comunicado do Banco de Portugal relativo à aceitação de empréstimos bancários adicionais para garantia de operações de crédito do Eurosistema, de 9 de fevereiro de 2012, disponível em http://www.bportugal.pt/en-US/OBancoeoEurosistema/Comu-nicadoseNotasdeInformacao/Pages/combp20120209.aspx.
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1.1.3. Strengthening banking sector monitoring and supervision
Another of EFAP’s components is closer monitoring of the banking sector. To this end, in addition to
the already mentioned assessment of the banks’ quarterly funding and capitalisation plans, a Special
Inspections Programme was carried out, a new credit risk ratio was published and the monitoring of
household and corporate indebtedness was enhanced.
Special Inspections Programme
The special inspections programme fundamentally aims to assess the soundness of the fi nancial system
in three workstreams:
(1) Analysis of the banks’ credit portfolios as at 30 June 2011, to confi rm that impairment levels,
calculation models and policies and associated procedures are appropriate;
(2) Across-the-board revision of the credit risk capital requirement calculations;
(3) Validation of the methodologies and parameters used by banks in the stress test exercises.
The inspections programme was monitored by a Steering Committee, chaired by Banco de Portugal and
consisting of representatives of the Bank, the International Monetary Fund, the European Commission,
the European Central Bank and three EU supervisory authorities10. Given the goals, scope and time frame
defi ned, the credit portfolios and methodologies and parameters used in the stress tests were assessed
using specialist outsourced services. The special inspections programme involved the eight largest
national banking groups, which represent around 80% of the banking system: Banco Comercial Portu-
guês, Banco BPI, Caixa Geral de Depósitos, Espírito Santo Financial Group, Caixa Económica Montepio
Geral, Santander Totta, Rentipar Financeira (BANIF) and Sistema Integrado do Crédito Agrícola Mútuo
(Integrated Mutual Agricultural Credit Scheme).
The assessment of both the credit portfolio and the calculation of capital requirements for credit risk
were completed at the end of 2011 and essentially validated the credit risk data underlying the solvency
assessment of the eight main banking groups. The work undertaken assessed the credit risk manage-
ment policies and respective control processes, as well as the risk management and control processes
behind the calculation of risk-weighted assets, which were deemed adequate overall, although there
is still room for improvement. Thus, the necessary adjustment measures, priorities and time frame for
their implementation were defi ned.
Validation of the methodologies and parameters used by each banking group in the stress tests was
completed in 201211. The work concluded that the parameters and methodologies used by the banks
are generally adequate, although with a degree of heterogeneity. Banco de Portugal will call on each
institution to adopt the methodological improvements identifi ed and will establish regular monitoring
procedures for checking the implementation of those measures.
Non-performing loans ratio
EFAP foresees the development of a credit quality indicator aligned with international standards, and its
inclusion in the set of prudential indicators published regularly. Thus, in addition to the ‘overdue and
doubtful loans ratio’, the non-performing loans ratio has begun to be published. The non-performing
loans concept as contained in the methodology manual for compiling the IMF’s Financial Soundness
Indicators statistics served as a reference for creating the new indicator. Instructions of Banco de Portugal
No 22/2011 and No 23/2011 set the rules for calculating the non-performing loans ratio, defi ne the
10 Banco de España, Autorité de Contrôle Prudentiel (France) and Banque Nationale de Belgique.11 See press release of Banco de Portugal of 1 March 2012 on the conclusion of the Special Inspections Programme, available at
http://www.bportugal.pt/en-US/OBancoeoEurosistema/ComunicadoseNotasdeInformacao/Pages/combp2012013.aspx.
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information that must be sent regularly to Banco de Portugal in this area and make compulsory the
inclusion of this ratio in the set of credit quality indicators published by the institutions. Furthermore,
Banco de Portugal publishes the set of credit quality indicators for the aggregated banking system in
its regular publications.
Monitoring indebtedness among the various institutional sectors
In 2011 Banco de Portugal produced and published a large set of statistical data relevant for defi ning
EFAP and for monitoring its execution. In parallel, a set of new statistical products began to be compiled
regularly.
The most relevant information regularly provided as part of this includes data on general government’s
fi nancing and debt; public debt (Portuguese and foreign) in the banks’ portfolio; redemptions and new
issues of internal and external debt; change in assets and liabilities held by central government in euro
and foreign currencies in Banco de Portugal and other fi nancial institutions; the assets and liabilities of
Banco de Portugal and the Portuguese banking system; the economy’s fi nancing data by debtor sector
(general government, state-owned enterprises, large companies, small and medium-sized enterprises
and private individuals); and corporate and household indebtedness.
It is also important to mention that, in compliance with the programme’s requirements, corporate and
household indebtedness data started being provided quarterly from November to the EU and the IMF in
the ‘Monitoring of corporate and households indebtedness’ report. The content of this report is being
improved and includes a set of indicators about the activity and fi nancing of Portuguese companies –
with details by activity sector and size, and distinguishing between private and public companies – and
households. The structure of the report was defi ned under the coordination of Banco de Portugal and
involved Statistics Portugal (INE) and the Ministry of Economy. In July 2011, Banco de Portugal organised
the ‘Workshop on Monitoring of Corporate and Household Indebtedness’, which brought together
Portuguese and foreign entities interested in the topic of indebtedness.
1.1.4. Improvement of the regulatory framework under EFAP
The reinforcement of the regulatory framework governing banks’ access to public funds, early intervention,
resolution, winding-up and deposit guarantees and insolvencies is also an important aspect of the
Economic and Financial Assistance Programme.
Preventive, early intervention and resolution mechanisms
The programme included a commitment to strengthen the preventive, early intervention and resolution
mechanisms for distressed credit institutions. Banco de Portugal took an active role in the technical and
legal aspects of preparing a legislative project that allowed the goals to be achieved. Similarly the credit
institutions supplied signifi cant contributions, through the Associação Portuguesa de Bancos (Portuguese
Banking Association). On 28 November Law No 48/2011 was published, authorising the Government
to revise the framework governing the reorganisation and winding-up of the institutions subject to
Banco de Portugal supervision. The Law’s implementing Decree-Law was published in 2012 (Decree-Law
No 31-A/2012 of 10 February 2012).
The new framework created three distinct intervention phases: early intervention, interim management
and resolution. The assumptions underlying their application differ according to the degree of risk and
lack of compliance with the laws and regulations governing the institution’s activity, as well as the size
of the potential consequences for the depositors or for the stability of the fi nancial system. In specifi c
situations, Banco de Portugal is responsible for deciding on the type of intervention, according to what
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is appropriate given the central aims of rebalancing the fi nances of the institution, protecting depositors
and maintaining the stability of the fi nancial system as a whole, while also taking into account any
impact for the taxpayer. The Bank’s decision will naturally be subject to the general principles of need,
appropriateness and proportionality.
Deposit guarantees
Decree-Law No 31-A/2012 of 10 February 2012 also reinforced the Fundo de Garantia de Depósitos –
FGD (Deposit Guarantee Fund), defi ning and clarifying its purpose. Thus the Fund’s resources may not
be used for purposes other than repayment of deposits or the transfer to another institution of deposits
with a credit institution that is subject to resolution measures (in this case, up to the amount that would
have to be paid out by the FGD).
The fi nancing of the FGD and the Fundo de Garantia do Crédito Agrícola Mútuo - FGCAM (Mutual
Agricultural Credit Guarantee Fund) was also strengthened, specifi cally for situations where these funds’
resources prove to be insuffi cient to meet their obligations. In this case, the law now allows the FGD
or FGCAM to take out loans or guarantees from the State and personal guarantees or securities in rem
from member credit institutions, among other means of fi nancing. The new regime also lays down that
preferential claims will apply to credits for deposits guaranteed by the FGD or FGCAM, as well as to credits
owned by the guarantee funds themselves, arising from the repayment of deposits and the provision
of fi nancial assistance as part of resolution measures. Those preferential claims increase the scope for
recovering the sums disbursed, contributing to the capitalisation of the guarantee funds.
Regime for winding up credit institutions and the Insolvency and Corporate Recovery Code
The special regime applicable to the winding-up of institutions supervised by Banco de Portugal was
also amended, through Decree-Law No 31-A/2012 of 10 February 2012. A key element of this was
the creation of a pre-judicial winding-up phase, to ensure the implementation of urgent measures
and operations that are needed for the continuity of the credit institutions’ vital functions and the
conservation of their assets, or for the safeguarding of the stability of the fi nancial system, naturally with the
exception of those measures of an exclusively judiciary nature. The Insolvency and Corporate Recovery
Code is also undergoing amendment, with the aim of facilitating the early rescue of viable companies.
The corresponding draft law, which was prepared with the active involvement of Banco de Portugal,
was submitted to Parliament at the end of December 2011.
1.2. MACRO-SUPERVISION OF THE FINANCIAL SYSTEM
The fi nancial crisis has underscored the need to ensure that systemic risk sources are regularly assessed
and that these assessments, where necessary, are followed by timely and appropriate preventive or
corrective measures. Therefore, in 2011, in parallel with developments in the EU, Banco de Portugal
strengthened its monitoring of fi nancial sector’s cyclical and structural trends, with a view to identifying
vulnerabilities and risks that may jeopardise fi nancial stability.
For this purpose, Banco de Portugal has created an internal Commission - Specialised Commission for
Supervision and Financial Stability (CESEF, in Portuguese), involving the Board of Directors and the Heads
of Department responsible for fi nancial stability issues. CESEF evaluates fi nancial stability conditions,
formulates macro-prudential policy guidelines, identifying the instruments to be used, and controls and
monitors macro-prudential developments, evaluating the effi ciency level of the instruments adopted.
This Commission monitors relevant developments in the EU, as well as participation in the European
Systemic Risk Board and the implementation of fi nancial stability measures set out in the Economic and
Financial Assistance Programme.
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Banco de Portugal has developed new methodologies to monitor the Portuguese economy and the
euro area, with emphasis on risk and fi nancial stability issues. The most developed areas are related to
the modelling of corporate and household behaviour in terms of credit default, and to the analysis of
the solvency of the fi nancial system and of other institutional sectors of the Portuguese economy. The
Bank has also developed new instruments for carrying out regular stress tests on the banking system, in
particular the modelling of household and corporate default, the modelling of concentration risk, and
the calculation of capital requirements in different macroeconomic scenarios. It is important to stress
Banco de Portugal’s participation in the Macro-prudential supervision and regulation network (MaRS),
a research structure created in 2010 within the ESCB (see Section 1.8).
In 2011, in cooperation with Statistics Portugal, Banco de Portugal launched the Survey on the fi nancial
situation of households, to obtain an integrated database on households’ wealth, indebtedness, income
and consumption, complemented by social and demographic aspects of the households and respective
individuals. This project is integrated in the Household Finance and Consumption Network (HFCN) carried
out in the euro area and coordinated by the ECB.
In 2011 Banco de Portugal participated in the stress-test exercise promoted by the European Banking
Authority (EBA). The purpose of this exercise was to evaluate the resilience to unfavourable market
developments of a representative set of banks in the EU, and to contribute to the overall assessment
of systemic risk within the EU’s fi nancial system. Similarly to 2010, the four main banking groups parti-
cipated in the exercise: Caixa Geral de Depósitos, Banco Comercial Português, Espírito Santo Financial
Group and Banco BPI.
Banco de Portugal participated in the different stages of the exercise: the preparatory stage, where
it contributed to the discussion of macroeconomic scenarios and to the defi nition of methodologies;
subsequently, it acted as interlocutor between national banking institutions and EBA; fi nally, the Bank
evaluated and discussed the results submitted by the institutions, and published the fi nal results on
15 July 2011. According to the results of the exercise, all Portuguese banking groups showed suffi cient
capacity to absorb the severe economic and fi nancial shocks envisaged in the adverse scenario. However,
Banco de Portugal took the initiative to ask banks submitting the values closest to the lower capital limit
in this exercise to formulate corrective measures to strengthen the respective fi nancial situations. These
measures were implemented a few months after publication of the exercise results, in compliance with
Banco de Portugal’s instructions.
In December 2011, EBA issued a recommendation requiring that the banking groups involved in the
stress-test exercise create a temporary capital buffer to strengthen the soundness of European banking
institutions, in order to address the uncertainty surrounding the sovereign debt crisis. Following the European
Recapitalisation Exercise, it was established that institutions’ capital positions should be strengthened, in
order to reach a Core Tier 1 ratio (according to the EBA defi nition) of 9%, after a prudent assessment
of their sovereign debt exposures, at market prices, as at 30 September 2011. In January 2012 the
Portuguese banking groups submitted recapitalisation plans detailing their arrangements to comply, by
30 June 2012, with capital strengthening requirements. The plans submitted by Portuguese institutions
will be discussed with Banco de Portugal, EBA and the relevant authorities in the colleges of supervisors.
The heightened relevance of macro-prudential supervision was also refl ected in Banco de Portugal’s
communication policy. Since 2010, the Financial Stability Report has been published on a semi-annual
instead of an annual basis – in May and November. In 2011, the Financial Stability Reports included, in
addition to the regular macro-prudential analysis, studies on the behaviour of banks in the credit market,
the modelling of household default, the role of debt in the closure of fi rms, and systemic risk indicators.
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1.3. PRUDENTIAL SUPERVISION
Within the scope of its regulatory and supervisory functions, Banco de Portugal contributes to the
stability, effi ciency and soundness of the fi nancial system, in order to ensure the solvency and liquidity
of the institutions under its supervision and the existence of appropriate internal governance systems.
In 2011, the Bank launched various initiatives oriented towards both an improvement of the regulatory
framework and of the effectiveness of the supervisory function.
1.3.1. Improved regulatory framework for supervision
In addition to the legal instruments adopted under the Economic and Financial Assistance Programme
(see Section 1.1), other regulatory instruments were adopted to support the prudential supervision of
fi nancial institutions. The most relevant instruments are related to capital adequacy, the legal system
applicable to deposit-guarantee funds and the internal governance of the institutions subject to Banco
de Portugal’s supervision12.
Own funds adequacy
In response to the lessons drawn from the fi nancial crisis, the EU revised the rules on own funds
requirements for the trading book and for re-securitisations, the supervisory review of remuneration
policies, and the strengthening of disclosure requirements. These changes were enshrined in Directive
2010/76/EU (Second review of the Capital Requirements Directive – CRIII) and were transposed into
national legislation through Decree-Law No 88/2011 of 20 July 2011. Notices of Banco de Portugal
No 9/2011 of 23 December 2011, and No 10/2011 of 9 January 2012 are also relevant.
Notice of Banco de Portugal No 3/2011 of 17 May 2011 established that institutions’ Core Tier 1 capital
ratio should reach 9% by 31 December 2011, and be no less than 10% by 31 December 2012 (revoking
Notice of Banco de Portugal No 1/2011, which had established that the minimum Core Tier 1 capital
ratio should reach 8% by the end of the year, in anticipation of Basel III requirements).
Instruction of Banco de Portugal No 12/2011 of 15 July 2011 established guidelines on the eligibility of
certain items for the calculation of core capital, providing greater convergence of supervisory practices
in the EU.
Instruction of Banco de Portugal No 28/2011 of 25 October 2011 defi ned the conditions for imple-
menting the deduction from own funds used to calculate the Core Tier 1 ratio in relation to deposits
with a remuneration rate above a given threshold (see also Notice of Banco de Portugal No 7/2011 of
18 October 2011, which amends the list of core capital negative items, as defi ned in Article 5 of Notice
of Banco de Portugal No 6/2010).
12 For more detailed information on the major fi nancial policy measures adopted in 2011 please refer to Banco de Portugal’s website
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Finally, in the wake of several developments affecting the calculation of own funds and capital
requirements of fi nancial institutions, Banco de Portugal issued Notices Nos 1 to 5/2012 on 20 January
2012. According to these Notices, the prudential impact arising from the partial transfer of pension funds
from banks to Social Security, the Special Inspections Programme, and the EBA recommendation on the
creation of a temporary capital buffer to meet sovereign debt risks will be deferred to 30 June 2012.13
System applicable to deposit guarantee funds
Decree-Law No 119/2011 of 26 December 2011 establishes, on a permanent basis, the legal threshold
of the guarantee to be provided by the Deposit Guarantee Fund (hereinafter referred to as ‘FGD’) and
the Mutual Agricultural Credit Guarantee Fund (hereinafter referred to as ‘FGCAM’) at €100,000 for the
repayment of deposits in the participating credit institutions, in the case of unavailability of deposits. This
Decree-Law transposes into national legislation Directive 2009/14/EC on deposit-guarantee schemes.
Banco de Portugal has introduced changes to the FGD contributions scheme applicable in 2012 (Instructions
of Banco de Portugal No 24/2011 and No 25/2011). Although maintaining the base contributory rate
at 0.03%, the Bank discontinued the 0.01% reduced rate applicable to deposits opened in the offshore
branches of Madeira and Santa Maria Islands. Banco de Portugal has also determined that in 2012 credit
institutions participating in FGD may not replace the payment of their annual contribution to the FGD
with irrevocable payment commitments. This contributes to reducing the ratio of these instruments to the
fi nancial resources directly managed by FGD14. The minimum contribution was maintained at €17,500.
As regards FGCAM, Banco de Portugal published:
• Notice No 5/2011 of 9 August 2011, which lays down that the member institutions of the FGCAM
must have in place an information system enabling them to identify, automatically or almost
automatically, and for each depositor, the amount of the respective refundable credit, calculated in
accordance with Articles 12 and 13 of Decree-Law No 345/98 of 9 November 1998; and
• Instruction No 26/2011 of 30 September 2011, which sets at 0.075% the base contributory rate
used to calculate the contribution of each member institution in 2012.
Internal governance of institutions
Banco de Portugal aims to increase the robustness of credit institutions’ governance models and, to that
end, it has issued regulations on internal controls and, more specifi cally, on remuneration policies. The
objective is to align credit institutions’ incentives and to strengthen their internal control mechanisms, in
order to prevent excessive risk taking. In this context, Notice of Banco de Portugal No 10/2011 of 9 January
2012 regulates the remuneration policy of members of the management and supervisory boards of the
institutions, as well as of their staff, and revokes Circular-Letter of Banco de Portugal No 2/2010/DSB.
13 Notice of Banco de Portugal No 1/2012 establishes a transitional regime that defers to 30 June 2012 the prudential impact on own funds and capital requirements arising from the special inspections programme and the partial transfer of post-employment defi ned benefi t plans to Social Security. Notice of Banco de Portugal No 2/2012 creates a new prudential fi lter enabling institutions, irrespective of the accounting policy applicable to accumulated actuarial deviations in the respective post-employment defi ned benefi t plans, to ensure equal treatment of the actuarial losses that have been accumulated for the purpose of calculating own funds. Notice of Banco de Portugal No 3/2012 establishes that institutions transferring part of their post-employment defi ned benefi t plans to Social Security should adjust the value of their actuarial losses not yet deducted from own funds, under the transitional regime laid down in that Notice, pro rata to the transferred liabilities. Notice of Banco de Portugal No 4/2012 establishes which hybrid instruments currently covered by Notice of Banco de Portugal No 6/2010 shall be eligible as positive items for Core Tier 1 purposes, when underwritten by the State in the context of the strengthened fi nancial soundness of credit institutions. Finally, Notice of Banco de Portugal No 5/2012 establishes that the four national banking groups included in the list of Annex II to EBA’s Recommendation ‘on the creation and supervisory oversight of temporary capital buffers to restore market confi dence’ (EBA/REC/2011/1), must comply with the measures set down in that Recommendation by 30 June 2012.
14 According to the contributory system defi ned in 2010, in 2011 member institutions were able to pay up to 10% of their annual con-tribution in the form of irrevocable payment commitments.
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1.3.2. Enhanced effectiveness of the supervisory activity
Banco de Portugal’s major concern in conducting banking prudential supervision has been to continuously
adapt its business model to best practice in terms of inspections, the institutions’ risk-evaluation models,
and the evaluation of processes on access to banking activity.
Inspections
In 2009 Banco de Portugal made the strategic choice of focusing direct supervision activities more on
on-site inspections. For the purpose, permanent inspection teams are now operating in the main banking
groups. This approach has been strengthened and currently covers six banking groups. This is essential for
a better knowledge of fi nancial institutions, their decision-making processes and strategic guidance, for
a more correct evaluation of the adequacy and effi ciency of their management and risk-control systems
and for a timely detection of problems.
In addition to permanent inspections and the initiatives under the Special Inspections Programme (see
Section 1.1), Banco de Portugal performed seven wider inspections: one on a bank, three on other types
of credit institutions (mutual agricultural credit banks, fi nancial credit institutions), one on a fi nancial
company and two on payment institutions.
In parallel with on-site inspections, regular off-site monitoring gained new assessment tools in 2011,
with more intensive recourse to information technologies, contributing to increased rationalisation of the
respective processes (see Section 3.3). The Bank has strengthened dialogue and direct interaction with
the supervised institutions, with a view to expediting procedures and rendering results more operational,
thereby improving supervisory effi ciency.
In order to review the typology of institutions subject to prudential supervision and to evaluate the risks
in terms of fi nancial stability, Banco de Portugal adapted its integrated risk assessment methodology
(the Risk Assessment Model). The Bank aims to make this tool more fl exible and adaptable to the
characteristics of each fi nancial group, and ready to be continuously fed with different information fl ows.
Validation of the institutions’ risk assessment models
During 2011 work continued on the validation of authorisation requests for the prudential use of the
Internal Ratings Based Approach (IRB approach) to cover credit risk (from three institutions) and the
Standardised Approach to cover operational risk (from one institution). This work included processes
carried forward from the previous year and involved cooperation with other EU supervisory authorities.
Banco de Portugal approved the authorisation request submitted by Banco Comercial Português for the
use of the IRB approach in Portugal in some risk segments. In addition, Banco de Portugal monitored the
utilisation constraints and roll out plans of authorisations granted by Banco de Portugal in the previous year.
Authorisation
Authorisation rules and, in particular, the suitability and professional qualifi cation requirements of the
members of the institutions’ management and supervisory boards, as well as shareholders´ suitability
requirements guarantee the sound and prudent management of the institutions, contributing to
safeguarding depositors’ and other stakeholders’ confi dence. Authorisation requirements also include the
control of qualifying shareholdings, minimum initial capital, feasibility of the business plan and adequacy
of human, technical and fi nancial resources.
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In 2011 Banco de Portugal analysed 758 processes related to authorisations (Table 1.1).
Table 1.1
PROCESSES RELATED TO AUTHORISATIONS IN 2011
Scope Type of process Number of
Processes
Registration of members of the management and supervisory boards and members of the general meeting
Evaluation of suitability and checking for potential incompatibilities
725
Control of qualifying holdings
Proposals submitted by potential buyers of qualifying holdings in credit institutions, investment fi rms and other fi nancial companies having their head offi ce in Portugal, for the evaluation of their suitability and project’s characteristics
23
Acquisition of qualifying holdings by Portuguese credit institutions in corporations having their head offi ce abroad
2
Setting up by Portuguese credit institutions of subsidiaries in non-EU Member States
3
Processes for merger and group restructuring operations
5
Source: Banco de Portugal.
The number of credit institutions, fi nancial companies and payment institutions registered with Banco
de Portugal declined from 404 on 31 December 2010 to 393 on 31 December 2011, continuing the
downward trend observed in previous years (Table 1.2). This was the result of a combination of two
opposing factors: on the one hand, a decline in the number of banks, investment fund management
companies and exchange offi ces; on the other hand, an increase in the number of payment institutions
operating in Portugal. The number of representative offi ces of credit institutions and fi nancial companies
based abroad and the number of holding companies also declined in 2011.
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Table 1.2
REGISTERED INSTITUTIONS
Registered
institutions 31/12/2011 Registrations Cancellations
No of institutions No of institutions No of institutions
2011(1) 2010 2011(2) 2010 2011(3) 2010
Credit institutions 200 207 5 2 12 8
Banks, including (a) 59 63 4 9 2
- Branches of banks of other EU Member States (a) 21 23 4 7
- Branches of banks of non-EU Member States 2 2
Savings banks 8 8
Central and mutual agricultural credit banks 91 91 1 6
Credit fi nancial institutions 20 21 1
Investment companies 3 3
Financial leasing companies 1 1
Factoring companies 3 3
Mutual guarantee companies 4 4
Branches of other foreign credit institutions (a) 11 13 1 1 2
Financial companies 105 112 1 1 8 3
Dealers 4 4
Brokers 7 8 1
Foreign exchange or money market mediating companies 1 1
Investment fund management companies 50 52 1 1 3 2
Credit card issuing or management companies 1 1
Wealth management companies 14 14
Group purchase management companies 6 6
Exchange offi ces 17 20 3 1
Credit securitisation fund management companies 4 4
Other companies 2 2
Payment Institutions including other EU Member State institutions
18 7 12 4 1
operating through branches 5 3 2 2
operating through agents 5 3 3 1 1
Representative offi ces of credit institutions and fi nancial companies having their head offi ce abroad
23 28 5
Holding companies 47 50 1 4 4 6
Total 393 404 19 11 30 17
Credit institutions having their head offi ce in an EEA(*) country, providing cross-border services 468 453 21 14 6 10
Payment institutions having their head offi ce in an EEA(*) country, providing cross-border services 89 40 49 20
Source: Banco de Portugal.(a) Developments not justifi ed by registrations and cancellations are due to a branch that started to take deposits.(1) On 31 December 2011, the following were undergoing winding-up proceedings: one bank, three savings banks, one investment
company, one dealer, one broker, one foreign exchange or money market mediating company, one investment fund management company, one wealth management company, two group purchase management companies, one exchange offi ce and one institution included in other companies
(2) As regards registrations in 2011 (new institutions), four branches of banks from other EU Member States were the result of merger/demerger processes of institutions in the home country; three payment institutions were the result of the transformation of three exchange offi ces; and the holding company was the result of the transformation of a card issuing or management company.
(3) As regards cancellations in 2011: one bank was due to the transformation into a branch of a credit institution having its head offi ce in the EU; fi ve branches of banks from other EU Member States were due to incorporation into other institutions, three of which maintained the former Financial Agent Code; one fi nancial credit institution was due to incorporation into a bank one investment fund management company was due to incorporation into a fi nancial credit institution and two were due to expiry; one credit card issuing or management company was due to transformation into a holding company; three exchange offi ces were due to transformation into payment institutions; and four holding companies ceased to be covered by Article 117 of the Legal Framework of Credit Institutions and Financial Companies.
(*) European Economic Area.
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1.4. BANKING CONDUCT SUPERVISION15
Banco de Portugal is the entity responsible for retail banking conduct supervision. The Bank regulates
and oversees the conduct of credit institutions and their compliance with information requirements in
their relationships with customers, when they disclose and sell retail banking products and services. The
Bank also promotes fi nancial education and information initiatives directed at bank customers. Banking
conduct supervision initiatives in 2011 aimed to improve the regulatory framework of retail banking
markets, to increase the effi ciency of the supervision exercise and to promote the provision of fi nancial
education and information to customers.
1.4.1. Improved regulatory framework for supervision
Since 2008 when it was assigned banking conduct supervision responsibilities, Banco de Portugal has
developed a broad regulatory framework applicable to retail banking markets, covering bank deposits,
housing loans, consumer credit and payment services. This framework established information
requirements and rules of conduct to be complied with by credit institutions when selling banking products
and services. The regulations cover all contact stages between institutions and customers, from advertisement,
initial assessment and contract negotiation to the signing of the contract and during its lifetime.
In 2011 Banco de Portugal developed new regulatory initiatives regarding credit institutions’ trading
practices, by issuing codes of conduct which defi ne the best practice to be complied with by institutions
in their relationships with bank customers. Codes of conduct for bundling (optional cross-selling) and
for transparency and completeness in the general clauses of credit contracts were issued.
In the fi rst case, best practice recommends that institutions abstain from bundling consumer credit,
housing loans or bank deposits with complex fi nancial products, where there is a possibility of capital
loss. Banco de Portugal has also strengthened information requirements applicable to bundling
In the second case, best practice was defi ned for the wording and content of ‘jus variandi’ clauses, i.e.
contractual clauses that grant the supplier of fi nancial services the right to change the interest rate or
the amount of any applicable charges, provided that it tracks market developments. In exercising this
type of contractual prerogative conferred by law16 credit institutions should abide by the principles of
transparency, objectivity and proportionality.
Following publication of Law No 19/2011 of 20 May 2011, which revised the legal framework of
minimum banking services, Banco de Portugal issued Notice No 4/2011 of 11 August 2011. This regulates
the information requirements to be complied with by credit institutions in disclosing their adhesion to
the above framework, and in the legally defi ned conditions governing individuals’ access to minimum
banking services.
1.4.2. Enhanced effectiveness of the supervisory activity
Banco de Portugal’s inspections assess compliance by credit institutions with the rules of conduct, the
obligation to provide transparent and accurate information to customers, and other applicable rules.
Banco de Portugal uses different surveillance instruments: on-site inspections of credit institutions, e.g.
‘mystery customer’ exercises or accredited inspections; it also carries out off-site inspections, analysing
15 For more detailed information on banking conduct supervision activities, please see the respective annual reports and semi-annual summaries published in Banco de Portugal’s website at http://clientebancario.bportugal.pt/pt-PT/Publicacoes/RSC/Paginas/RSC.aspx.
16 Decree-Law No 446/85 of 25 October 1985.
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mandatory information reported to the Bank (price lists and other items), evaluating advertising campaigns
and inspecting websites; in addition, it treats complaints received from bank customers.
In 2011 Banco de Portugal stepped up its inspections within the scope of banking conduct supervision. In
this framework, the Bank reinforced its on-site inspections to institutions, as well as off-site inspections.
The number of on-site inspections rose considerably, associated with wider geographical dispersion.
As regards ‘mystery customer’ exercises, the Bank checked whether Standardised Information Sheets were
provided to customers, in line with the pre-defi ned models, and whether the information provided at the
counter was complete, accurate and transparent. In the case of consumer credit, inspections focused on
the behaviour of institutions in ‘points of sale’ (i.e. in commercial establishments such as hypermarkets,
car dealers or other). This behaviour was also checked under a ‘mystery customer’ exercise, since the
agents in question are outside the Bank’s supervision perimeter. As regards accredited inspections at
the counters and central services of credit institutions, Banco de Portugal assessed compliance with the
applicable rules in terms of contracts signed with customers. Off-site inspections reviewed the information
made available in the institutions’ websites, in particular, their price lists.
1.4.3. Recommendations and specifi c orders
Recommendations and specifi c orders are the instruments most frequently used by Banco de Portugal
to correct and remedy possible non-compliances or irregularities detected during the banking conduct
supervision exercise. Given the characteristics of retail banking products and services, using these
instruments makes it possible to resolve infringements of customers’ rights swiftly.
In 2011, Banco de Portugal issued 1,143 recommendations and specifi c orders, mostly covering rules on
price list transparency, payment services and deposits (Chart 1.1).
Chart 1.1
SPECIAL RECOMMENDATIONS AND ORDERS IN 2011
Source: Banco de Portugal.
1.4.4. Promoting fi nancial information and literacy
In 2011 activities to promote fi nancial information and literacy intensifi ed signifi cantly, following the
conclusion of the work related to the Financial Literacy Survey and the launch of the National Plan
for Financial Education. This Plan is coordinated by Banco de Portugal, in cooperation with the other
regulators in the National Council of Financial Supervisors.
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The Bank Customer Website17 has been continually updated with new contents on microcredit, detailing
types of loans which, on account of their amount and purpose, fall under that credit concept. Fraud
prevention-related issues were also included in the Bank Customer Website, aggregating information
on: most frequent types of fraud; signals which should alert bank customers; precautionary measures
to be taken and the entities to be notifi ed in case of (suspected) fraud. Special focus was placed on
phishing, i.e. a situation where fraudulent entities pretend to be credit institutions with the purpose of
persuading bank customers to provide relevant personal information, in order to have access to home
banking services (e.g. passwords, bank account numbers, card-related information).
The publication of leafl ets on banking products began in 2011. Two leafl ets – Crédito aos Consumidores
– Direitos e Deveres (Consumer credit – rights and obligations) and Depósitos Bancários – Direitos e
Deveres (Bank deposits – rights and obligations) – contribute to promoting responsible borrowing and
saving, and explain bank customers’ rights and obligations. These leafl ets are published on the Bank
Customer Website, and were also made available in Banco de Portugal’s head offi ce, Oporto branch,
regional delegations and agencies and at credit institutions’ branches. The decision to have these leafl ets
available in credit institutions results from the consumers’ preference – observed through the Survey on
the Financial Literacy of the Portuguese Population – for receiving information via their usual bank. The
documents published on the Bank Customer Website also include the brochure on the National Plan for
Financial Education (in May) and the Report on the Survey on the Financial Literacy of the Portuguese
Population (in November).
1.5. LEGAL ENFORCEMENT
Banco de Portugal has invested in increasing legal enforcement, with a view to reducing irregularities
by the supervised fi nancial entities. In addition to the sanctioning procedures, key among which are
administrative proceedings, Banco de Portugal makes use of other non-sanctioning mechanisms to deal
with breaches of regulations or risk-bearing situations in terms of supervisory objectives. In this context,
measures for combating money laundering and terrorist fi nancing and to protect the banking perimeter
are also relevant.
1.5.1. Prevention of money laundering and terrorist fi nancing
Banco de Portugal is responsible for evaluating the adequacy of the procedures and systems to prevent
money laundering and terrorist fi nancing, which, according to applicable law, must be adopted by credit
institutions and fi nancial companies.
The following activities stood out in 2011:
• Inspections of 13 entities subject to Banco de Portugal’s supervision;
• Cooperation with judicial authorities, including the provision of technical advice in ongoing criminal
investigations;
• Participation in the work and meetings of international groups – such as the Financial Action Task
Force (FATF), the Committee on the Prevention of Money Laundering and Terrorist Financing, within
the scope of the European Commission, and the Anti-Money Laundering Committee, under the
European Banking Authority (EBA) – and participation in the Mutual Evaluation of Timor-Leste,
carried out by the Asia/Pacifi c Group on Money Laundering;
17 The Bank Customer Website was launched by Banco de Portugal in 2008. It contains information on bank customers’ rights, and describes the characteristics of retail banking products and services as well as the laws and regulations which govern their trading.
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• Dissemination through the fi nancial system of information on anti-money laundering and anti-
-terrorist fi nancing initiatives, or on the implementation of international fi nancial sanctions (FATF
press releases; international instruments, within the scope of the United Nations and the European
Union, related to sanctions imposed on Libya; and documents related to the UN Security Council
Al-Qaida and Taliban Sanctions Committee).
• Organisation of and participation in education initiatives, under cooperation protocols signed with
the Prosecutor General’s Offi ce and the Criminal Police.
1.5.2. Banking perimeter protection
Banco de Portugal is responsible for adopting sanctions and other measures to counter the exercise
of fi nancial activities by non-authorised persons or entities. This is known as banking or regulatory
perimeter protection.
In 2011 a number of off-site and on-site investigations of irregularities were carried out, including
14 inspections. The Bank has been cooperating with legal authorities in investigations on common
issues and in the implementation of education initiatives, under cooperation protocols signed with the
Prosecutor General’s Offi ce and the Criminal Police.
1.5.3. Non-sanctioning institutional intervention
In 2011 activities included the following:
• Analysing and proposing decisions regarding the possible withdrawal of authorisation of credit
institutions and fi nancial companies subject to Banco de Portugal’s supervision (totalling fi ve
processes - ongoing or concluded);
• Appraising a possible re-evaluation of the suitability of members of the management and auditing
boards of institutions subject to the supervision of and registration with Banco de Portugal (based
on supervening facts), including a proposal to cancel the respective register (totalling eight processes
- ongoing or concluded);
• Monitoring the activities of State commissioners appointed under Decree-Law No 30689 of
27 August 1940 and judicial liquidators or liquidation committees appointed under Decree-Law
No 199/2006 of 25 October 2006.
1.5.4. Administrative proceedings
In 2011 Banco de Portugal initiated 49 administrative proceedings related to offences laid down in the
Legal Framework of Credit Institutions and Financial Companies, in applicable legislation on the Complaints
Book, in regulations on the use of cheques and in the Legal Framework of Payment Institutions and
Payment Services. In addition, 36 fi nal decisions were made in administrative proceedings, six of which
were appealed (Table 1.3).
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Table 1.3 | Administrative proceedings in 2011
OVERALL INDICATORS
Proceedings carried forward in 2010 78
Proceedings initiated in 2011 49
Proceedings settled in 2011 36
Proceedings pending at 31.12.2011 91
PROCEEDINGS INITIATED I 49
Enabling legal act
Decree-Law No 454/91 of 28 December 1991
Legal System Governing the Cheque 6 proceedings
Decree-Law No 298/92 of 31 December 1992
Legal Framework of Credit Institutions and Financial Companies
33 proceedings
Decree-Law No 156/2005 of 15 September 2005
Complaints Book 6 proceedings
Decree-Law No 317/2009 of 30 October 2009
Legal Framework of Payment Institu-tions and Payment Services
4 proceedings
Infractions
Non-authorised fi nancial activityNon-compliance with the value date and deadline for making available the amounts deposited through cheques delivered at ATMsNon-compliance with reporting requirementsNon-compliance with reporting requirementsNon-compliance with rules relating to the opening of depositsNon-compliance with rules relating to the use of chequesNon-compliance with mandatory provisions regulating the activity of credit institutions, including infringement of Article 28 of Decree-Law No 133/2009 on maximum ratesNon-compliance with rules of conductFailure to provide / non-existence / non-advertisement of Complaints Book Supply of false information to Banco de PortugalNon-authorised payment operations
Defendants
22 credit institutions2 fi nancial companies1 holding company1 payment institutionIndividuals - Members of the management/auditing boards and holders of management posts at credit institutions
PROCEEDINGS SETTLED I 36
Enabling legal act
Decree-Law No 454/91 of 28 December 1991
Legal System Governing the Cheque 1 proceedings
Decree-Law No 298/92 of 31 December 1992
Legal Framework of Credit Institutions and Financial Companies
31 proceedings
Decree-Law No 156/2005 of 15 September 2005
Complaints Book 2 proceedings
Decree-Law No 317/2009 of 30 October 2009
Legal Framework of Payment Institu-tions and Payment Services
2 proceedings
Infractions
Non-authorised fi nancial activityNon-compliance with the value date and deadline for making available the amounts deposited through cheques delivered at ATMsNon-compliance with reporting requirementsNon-compliance with reporting requirementsNon-compliance with rules relating to the opening of depositsNon-compliance with rules relating to the use of chequesNon-compliance with mandatory provisions regulating the activity of credit institutions, including infringement of Article 28 of Decree-Law No 133/2009 on maximum ratesNon-compliance with rules of conductFailure to provide / non-existence / non-advertisement of Complaints Book Supply of false information to Banco de PortugalNon-authorised payment operations
Defendants
21 credit institutions1 group purchase managemnet companyIndividuals - Members of the management/auditing boards and holders of management posts at credit institutions
Appeals6 sanctions decided by Banco de Portugal in breach of regulations proceedings in 2011 were appealed
Source: Banco de Portugal.
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1.6. DEPOSIT GUARANTEE FUND MANAGEMENT
Banco de Portugal is responsible for ensuring the technical and administrative services, including legal
support, required for the good operation of the Fundo de Garantia de Depósitos – FGD (Deposit Guarantee
Fund) and Fundo de Garantia do Crédito Agrícola Mútuo – FGCAM (Mutual Agricultural Credit Guarantee
Fund)18. Banco de Portugal is also responsible for setting, through a Notice, the relevant parameters for
the purpose of calculating the annual contributions of member institutions to those funds.
47 credit institutions authorised to take deposits were members of the Deposit Guarantee Fund at the
end of 2011: 37 banks, 5 savings banks and 5 mutual agricultural credit banks not participating in the
Sistema Integrado do Crédito Agrícola Mútuo (Integrated Mutual Agricultural Credit Scheme)19.
As at 31 December 2011, the Fund’s fi nancial resources totalled €1,397 million, representing an increase
of 3.2% (€43 million) from the end of the previous year. This change is chiefl y explained by annual
contributions received and by the incorporation of income generated during the year. These items more
than offset the amounts spent during 2011 on repayment of deposits held with Banco Privado Português,
S.A. (which is currently under liquidation proceedings). €444.4 million of the Fund’s fi nancial resources
corresponded to irrevocable payment commitments made and duly collateralised by credit institutions.
Over the course of 2011 the Deposit Guarantee Fund continued to repay deposits held with Banco
Privado Português, S.A., and paid a total of €8.2 million, which had not been paid in the previous fi scal
year. In effect, the unavailability of deposits resulting from the withdrawal of authorisation gave rise to
a number of unprecedented academic and case-law issues, especially relating to the legal assumptions
of the depositors’ right to repayment, up to the legal limit of the Fund’s guarantee. The overall value
of the payments made in the repayment operation of deposits held with Banco Privado Português, S.A.
reached €97.4 million on 31 December 2011.
As at 31 December 2011, 86 agricultural credit institutions were members of the Mutual Agricultural
Credit Guarantee Fund. In 2011 they made a contribution of €8.2 million. On the same date, the
fi nancial resources of this Fund reached €226.64 million, representing an increase of €33.22 million
from December 2010.
1.7. PAYMENT SYSTEMS
Banco de Portugal is responsible for the oversight of payment systems, ensuring their operational safety
and effi ciency, thereby contributing to fi nancial stability. Banco de Portugal’s responsibilities cover not only
traditional large-value payment systems, but also retail payment systems, payment instruments (especially
electronic such as payment cards, credit transfers and direct debits) and clearing and settlement systems.
18 The Mutual Agricultural Credit Guarantee Fund was created by Decree-Law No 182/87 of 21 April 1987. Its main tasks are to guarantee the repayment of deposits opened with Caixa Central de Crédito Agrícola Mútuo (central mutual agricultural credit bank) and Caixas de Crédito Agrícola Mútuo (mutual agricultural credit banks) that are members of the Sistema Integrado do Crédito Agrícola Mútuo – SICAM (Integrated Mutual Agricultural Credit Scheme), and to promote and undertake the action deemed necessary to ensure the solvency and liquidity of the member banks.
19 In 2011 two banks ceased to be members of the Deposit Guarantee Fund: Deutsche Bank (Portugal), S. A., due to its transformation into a branch of Deutsche Bank AG; and the branch in Portugal of AS Privat Bank of Latvia, which participated in the Fund for supplementary guarantee purposes (this is no longer justifi ed after the legal changes taking place in Latvia, which set the limit at €100,000 on the guarantee of deposits covered by the guarantee scheme in that Member State). Deposits opened with these two institutions ceased to be covered by the Deposit Guarantee Fund, and are covered by the depositor-protection schemes in the respective home countries, i.e. the Latvian and German schemes..
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In addition to payment systems oversight, Banco de Portugal acts as operator of SICOI – the interbank
clearing system that processes retail payments – and the Portuguese component of TARGET2,20 the
Trans-European Automated Real-time Gross settlement Express Transfer system operated by Eurosystem,
through which monetary policy operations are mandatorily settled.
Banco de Portugal set objectives for 2011 to improve payment systems oversight and ensure the smooth
operation of TARGET2-PT, in parallel with the objectives related to its monetary authority functions under
the Eurosystem (see Section 2.5)21.
1.7.1. Enhancement of payment systems oversight
In the exercise of its oversight function, Banco de Portugal observes the principles laid down by the
Eurosystem, namely:
• It establishes high transparency standards, publishing its policies on payment systems oversight and
regularly making available information on oversight activities carried on;
• It adopts the principle of separating operational and oversight functions, thus mitigating confl icts
of interest that might arise due to the fact that it is simultaneously operator and payment systems
oversight authority;
• It applies the same oversight policies to all systems, irrespective of whether these are private or
operated by Banco de Portugal;
• It establishes that system owners and operators share the primary responsibility for ensuring infras-
tructure operation and providing effi cient payment and settlement services.
In 2011 Banco de Portugal monitored and participated in oversight activities within the scope of the
ESCB, especially by: evaluating the new functionalities introduced by release 5.0 of TARGET2’s SSP
(Single Shared Platform); analysing TARGET2 and EURO1 compliance with BCOE (Business Continuity
Oversight Expectations)22; and concluding the evaluation report of EURO1 oversight. Banco de Portugal
was involved in revising the criteria for classifi cation of the retail payment systems and in the fi rst stage
of the database project for OSCAR payment cards (Oversight Cards). Internally, the Bank monitored the
registry of payment institutions, pursuant to the Directive on payment services (2007/64/EC).
Banco de Portugal has also developed activities to monitor and evaluate securities settlement and clea-
ring systems. Within the Eurosystem framework, it carried on activities related to the location policy of
Eurosystem infrastructures, TR (trade repositories) oversight, pre-evaluation of the development stage
of TARGET2-Securities and the exercise of interdependence mapping (institution-based and system-
-based interdependencies) of the most relevant institutions in the market. At national level, Banco de
Portugal monitored the operation of SITEME – securities settlement system operated by the Bank, aimed
at supporting the analysis and promoting the measures designed to prevent risks, especially fi nancial
and operational risks.
20 TARGET2-PT is the Portuguese component of TARGET.21 Detailed information on most relevant developments and statistical data on payment systems can be obtained in the Report on
Payment Systems published annually by Banco de Portugal and available at http://www.bportugal.pt/en-US/SistemasdePagamento/Publicacoes1/Pages/Publicacoes.aspx.
22 Payment system operated by EBA Clearing Company, which processes domestic and cross-border payments in euro.
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1.7.2. Effective and reliable operation of TARGET2
TARGET2-PT-related activities, which are important for fi nancial stability, ensure the smooth and effective
functioning of the system and cover several activities related to the contingency and business continuity
plans, improvement of the system at the technological level, as well as regulatory framework processes
and changes.
Overall transactions settled through TARGET2-PT
Overall transactions in TARGET2-PT increased in 2011: total gross settlements rose by 0.6% in volume
and 7.6% in value (Table 4.2). The upward trend observed in 2010 (when gross settlements grew by
3.9% in volume and 14.6% in value) has thus continued, albeit less markedly.
Table 1.4 volume in thousands; value in € billion
OVERALL TRANSACTIONS SETTLED THROUGH THE GROSS SETTLEMENT SYSTEM IN PORTUGAL
2010 2011 Change (%)
Volume Value Volume Value Volume Value
Total transactions settled 1,581 6,551 1,591 7,052 0.6 7.6
Domestic transactions 719 3,718 683 4,274 -5.0 15.0
Inter-institutional operations 370 3 347 372 3 873 0.5 15.7
Securities settlement system(1) 101 154 96 184 -4.9 19.6
of which: Interbolsa 100 112 95 123 -5.1 10.3
Other settlement systems(2) 248 218 215 217 -13.3 -0.2
of which: SICOI 248 218 215 217 -13.3 -0.2
Cross-border transactions 863 2,833 909 2,778 5.3 -1.9
Inter-institutional operations 591 2,623 639 2,636 8.2 0.5
Securities settlement system(1) 235 68 236 47 0.3 -31.4
of which: Interbolsa 233 66 233 44 0.3 -33.9
Other settlement systems(2) 36 142 33 95 -8.6 -33.0
of which: SICOI 31 13 28 14 -11.2 5.1
Source: Banco de Portugal.(1) Includes the following systems: Bank of Greece Settlement System, Eurex Clearing AG, Interbolsa, LCH Clearnet S. A., OMIClear
and SITEME-Securities Settlement.(2) Includes the following systems: Athens Clearing Offi ce, DIAS, EURO1, Euronext Paris S. A., SICOI and STEP2.
The positive overall change in gross settlements volume was due to 5.3% growth at cross-border level,
which offset the 5% decline at national level. The increase observed in 2011 in the volume of cross-border
settlements is explained by the 8.2% change in interbank and customer transfers. This increase more
than offset the decline in settlements from ancillary systems, especially operations settled through SICOI,
which fell by 1.2% from 2010. The national segment was also affected by the decline in the volume of
settlements from ancillary systems: transactions settled through Securities Settlement Systems declined
by 4.9% and those settled through other settlement systems fell by 13.3%. As regards other settlement
systems, the volume of large-value bilateral transactions through SICOI (cheques, credit transfers and
large-value direct debits) contracted by 15.9%.
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In terms of values settled, the overall change of 7.6% in 2011 is explained by the 15% growth of domestic
transactions, especially fi nancial operations with Banco de Portugal. In effect, open market operations
had the largest impact on values settled in the domestic segment, with a 60.8% increase (809 billion)
from 2010, which more than offset the 57% decline in standing facilities (approximately 422 billion,
included under ‘Inter-institutional operations’). This increase in the domestic segment offset the losses
in the cross-border segment, which declined by 1.9%, chiefl y due to a contraction exceeding 30% in
the value of transactions from securities settlement systems and other settlement systems.
TARGET2 service level
In 2011 the Single Shared Platform (SSP), where TARGET2 is based, functioned in a stable operational
framework. There were, however, some incidents, such as the general service outage on 25 July, which
lasted approximately three hours, from 6:00 to 9:00 a.m. (GMT). This outage prevented payments from
being processed in all TARGET2 components and caused the fi rst ever activation of the Contingency
Module, in order to ensure that critical and very critical payments would be processed. The break in the
service was due to a loss of synchronisation of two system components, jeopardising the correct start
of a business day preparation stage.
In 2011 there were also:
• Delays in processing payments from ancillary systems, when release 5.0 of SSP went live on
21 November;
• Three extensions of TARGET2’s time of operation, due to technical problems in the ancillary systems
linked to the Spanish and French system components;
• Two incidents affecting, for short periods, payment processing and access to the Information and
Control Module (ICM) by Internet-based participants (IBP).
As regards the Portuguese component of TARGET2, the settlement of some of SICOI’s subsystems
occurred after the time set in the relevant regulation on four occasions, with delays ranging from
30 minutes to three hours.
Contingency and business continuity testing
Semi-annual training in the contingency mechanisms made available by Banco de Portugal has been
performed among all institutions participating in TARGET2-PT. This training has covered the simulation of
malfunctioning situations in the institutions’ internal systems and situations of general failure in the SSP,
falling back on the Contingency Module to process critical payments. Tests were also made to practise
for a failure in access to an SSP’s Portuguese ancillary system. During this testing Banco de Portugal acted
on behalf of the contingency system, by sending fi les and subsequently monitoring the system. Finally,
in May and October, in the context of the Business Continuity Plan, Banco de Portugal conducted
semi-annual simulations, ensuring the involvement of all teams responsible for the operation of the system
and showing the ability to recover business functions under a contingency situation (see Section 3.2.).
In parallel, within the scope of the contingency tests that are mandatory for NCBs participating in
TARGET2, Banco de Portugal completed the training on the use of the Contingency Module in a production
environment, organised by the Eurosystem, and the simulation of its internal system malfunctioning,
where the SSP supporting team acted on behalf of Banco de Portugal.
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Changes to the TARGET2 system
In 2011 the main changes to the TARGET2 system were the following:
• Installation, on 28 February and 7 June, of intermediate versions 4.1 and 4.2 of the Customer Related
Services Systems (CRSS), which enhanced statistical reports for the exclusive use of central banks;
• Implementation, on 21 November, of version 5.0 of the CRSS, to prepare this platform for storing
specifi c national data in the context of the next generation of CRAKS1 (a block of services dedicated to
central banks and to be used on an optional basis by them, which provides reports on historical data).
• Entry into production, also on 21 November, of version 5.0 of the SSP. In addition to optimising
existing functionalities, this covered improvements related to detailed information provided to central
banks. This version implemented an alternative contingency network, Corenet, to be used exclusively
by central banks in the case of a general or local failure of the SWIFT network
The Interbank Working Group on TARGET2-PT was reactivated in 2011, with a view to analysing the
annual releases of TARGET2 and SWIFT and their connection with Eurosystem’s relevant projects within
payment systems (namely TARGET2-Securities, collateral management systems, SSP’s standing facilities
module) and also to monitoring the operation of TARGET2 linking infrastructures in Portugal (especially
SIBS’s AT2).
Changes to the regulatory framework of TARGET2
In 2011, Banco de Portugal changed the regulatory framework of TARGET2-PT in order to refl ect two new
ECB guidelines23. These guidelines regulate the exceptional provision of overnight credit to certain eligible
central counterparties that are not licensed as credit institutions, and include, inter alia, the ‘grounds of
prudence’ among the criteria on the basis of which an application for participation in TARGET2 will be
rejected, and a participant’s participation in TARGET2 or its access to intraday credit might be suspended,
limited or terminated.
1.8. INTERNATIONAL REPRESENTATION AND INSTITUTIONAL COOPERATION
International activity and institutional cooperation for fi nancial stability were particularly intense in 2011.
Alongside activities relating to the Economic and Financial Assistance Programme (EFAP), key work took
place within the new European System of Financial Supervisors, in the ESCB’s Financial Stability Committee,
in monitoring and participation in various multilateral forums and in cooperation with other supervisory
authorities at national and international levels. One of Banco de Portugal’s strategic objectives is to make
a proactive contribution in these fi elds.
23 Guideline ECB/2011/2 of 17 March 2011, and Guideline ECB/2011/15 of 14 October 2011. These two Guidelines implied the revision of Instructions of Banco de Portugal No 24/2009, on intraday credit and the Contingency Liquidity Facility, and No 33/2007, on TARGET2-PT Regulations (changes published in the Offi cial Bulletins of Banco de Portugal No 5/2011 of 16 May 2011 and No 12/2011 of 15 December 2011 respectively).
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1.8.1. Activity within the Economic and Financial Assistance Programme
Representatives of the Bank joined national teams responsible for interactions with members of the
European Commission, the ECB and the IMF in the technical discussion and analytical work underpinning
the commitments undertaken under the EFAP, namely those relating to the fi nancial system’s regulatory
and supervisory measures and the safeguarding of fi nancial stability. This interaction has also taken place
through technical assistance missions, tasked with capacity-building in areas relating to EFAP measures,
such as, for example the stress tests performed on the banking system and the monitoring of corporate
and household indebtedness.
The programme’s fi rst quarterly review missions took place in August and November 2011 and came to
successful conclusions. As was the case for the programme’s negotiation, Banco de Portugal undertook
the technical work behind that assessment and the discussion of the draft memoranda.
The Bank is in permanent contact with the European institutions, the IMF and the other national autho-
rities to implement and monitor the EFAP, and carry out its remit of issuing regular reports, as specifi ed
in the programme.
1.8.2. Activity within the European System of Financial Supervisors
The redesign of the EU’s institutional supervisory framework resulted in the creation of the European
System of Financial Supervisors, comprising the European Systemic Risk Board (ESRB), responsible for
macro-prudential supervision, the European Supervisory Authorities (ESAs) for the banking, insurance
and securities sectors (European Banking Authority (EBA), European Insurance and Occupational Pensions
Authority (EIOPA) and European Securities and Markets Authority (ESMA)), responsible for micro-prudential
supervision, the joint committee for these three authorities and the national supervisory authorities. The
new structure entered into force on 1 January 2011. Banco de Portugal is present, with voting rights,
in the decision-making bodies of the ESRB and the EBA.
European Systemic Risk Board (ESRB)
The European Systemic Risk Board is responsible for macro-prudential supervision of the fi nancial
system in the EU, contributing to the prevention or mitigation of systemic risks to fi nancial stability. The
Governor of Banco de Portugal, as a governor of a EU NCB, is a member with voting rights of the ESRB’s
General Board, the committee’s sole decision-making body. Similarly, the Bank’s representation on the
ESRB committees refl ects its two-fold role as national central bank of the ESCB and national banking
supervisory authority.
In 2011 the Governor took part in the quarterly meetings of the ESRB’s General Board. Aside from
decisions regarding the institution, process and organisational aspects and relations with the ESAs and
the European institutions, the General Board analysed the risks to the EU’s fi nancial stability and systemic
vulnerabilities. Banco de Portugal was particularly active in this area, especially in researching and
preparing the dossiers relating to macro-prudential policy, instruments and information. Representatives
from the Bank took part in the work and meetings of the Advisory Technical Committee (ATC).
The ESRB made its fi rst recommendations under its statutory responsibilities, covering the following key
areas: foreign currency lending to households and small and medium-sized enterprises, which are not
protected suffi ciently from exchange rate risk linked to those loans; the funding of banks in dollars;
and the macro-prudential mandates of the national authorities. The ESRB also analysed the effects of
launching complex fi nancial products on the fi nancial retail markets and, specifi cally, their impact on
the level of systemic risk.
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European Banking Authority (EBA)
The European Banking Authority has a role in banking sector regulation, binding mediation between
supervisory authorities, the operation of supervisory colleges of cross-border groups, strengthening
protection of consumers and investors and identifying and quantifying systemic risk, in liaison with the
ESRB. The EBA has additional powers in emergency situations.
In 2011 the EBA carried out the European stress tests and made a recapitalisation exercise, in which
the four main Portuguese banking groups took part (see Section 1.1). Banco de Portugal is a member,
with voting rights, of the EBA’s Board of Supervisors, and takes part in the Standing Committees (Stan-
ding Committee on Regulation and Policy, Standing Committee on Oversight and Practices, Standing
Committee on Accounting, Reporting and Auditing, Standing Committee on Financial Innovation) and
the respective sub-structures that support the Board’s decisions.
Supervisory colleges
The consolidated supervision of the cross-border institutions and groups and control of the respective
risks requires strict cooperation between the various authorities involved in their supervision. For this
purpose, supervisory colleges were created for the banking groups active in the EU, under the aegis of
the authority responsible for consolidated supervision, aiming to increase effective supervision of those
banking groups through coordination and joint decision-making in various fi elds: gathering and disclo-
sure of relevant information; supervisory activities; approval of internal calculation models for own funds
requirements; risk assessment and capital adequacy of the group or institutions.
In 2011 Banco de Portugal, as home supervisory authority (responsible for supervision on a consolidated
basis), coordinated the work of the Grupo Banco Comercial Português supervisory college and launched
projects relating to the groups whose activity is less signifi cant in the EU (non-fully-fl edged colleges).
As host country authority, the Bank took part in supervisory colleges of various banking groups based
in other EU Member States.
1.8.3. Activity within the framework of the ESCB
ESCB’s Financial Stability Committee
In association with other European and Portuguese authorities, the ECB took a key role not only in
monitoring risks and assessing the resistance of the banking systems, but also in the discussions and
decisions relating to redesigning the European framework for crisis management and resolution. This
activity took place in strict collaboration with the ESCB committees, particularly with the Financial Stability
Committee. This Committee was created in January 2011 with the aim of helping the ECB’s decision-
-making bodies to perform their fi nancial stability responsibilities in the context of the new European
framework for macro-prudential supervision and for dealing with systemic risk. Banco de Portugal is part
of this Committee and its respective sub-structures.
Macro-prudential Research Network (MaRS)
Banco de Portugal is part of the Macro-prudential Research Network (MaRS), a research structure created
by the ESCB in 2010. MaRS’s goal is to develop models and tools that provide analytical support to
improve macro-prudential supervision in the EU. Banco de Portugal took an active role in the various
topical working groups studying the relationships between fi nancial stability and the economy as a whole;
developing early warning systems for systemic risk; and assessing contagion risk.
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1.8.4. Participation in other multi-lateral forums
In 2011 the international agenda continued to be dominated by the risks and consequences of the
fi nancial crisis, in a context of worsening growth prospects and increasing vulnerability, particularly for
advanced economies.
The G20 and the IMF focused on the short-term response to the worsening economic and fi nancial
situation and on the necessary strengthening of the global fi nancial safety nets, along with a broader
refl ection on the reform of the international monetary system and the role of the IMF itself. Banco de
Portugal works with the European organisations responsible for aligning the EU’s positions in the IMF and
the G20. At national level, under the legislation in force, the Bank is also responsible for managing the
relationship between Portugal and the IMF. The spring meeting of the IMF’s International Monetary and
Financial Committee, held in Washington on 15 and 16 April 2011, looked at the global economic and
fi nancial situation, along with the role of the IMF in responding to the global challenges and threats. These
topics also topped the agenda of the IMF/World Bank annual meetings, which took place in Washington
on 23 and 24 September. As usual, a delegation from Banco de Portugal, led by the Governor, took part
in these meetings, using the occasion to hold several institutional meetings as well.24
The Governor of Banco de Portugal took part in the 81st Annual General Meeting of the Bank for Inter-
national Settlements (BIS), which covered shareholder-related matters and themes from the international
fi nancial agenda, including the global economic situation, developments in the fi nancial markets and
the policy initiatives aiming to strengthen the world’s fi nancial stability, especially in the realm of fi nan-
cial regulation. The Governor also took part in the BIS Governors’ bimonthly meetings, at which the
developments and risks in the economic situation and global fi nancial system are monitored. Banco de
Portugal also continued to follow the BIS agenda regarding Basel III and the work of the Basel Committee
on Banking Supervision.
The Bank pursued multilateral cooperation and monitored progress of the international standards and
the EU’s legislative instruments, participating in various international committees, groups and forums,
namely as part of the European Commission and the Council of the European Union, the Europe Regional
Group of the Financial Stability Board (created in 2011), the OECD and the International Network on
Financial Education (INFE)
1.8.5. International cooperation with other supervisory authorities
On 5 and 6 December 2011, the 1st Banking Supervision Meeting of the Central Banks of the Portuguese-
-speaking Countries took place in Lisbon, which brought together representatives of the central banks
of Angola, Brazil, Cape Verde, Mozambique, São Tomé and Príncipe and Timor-Leste.
At the ECB’s invitation, Banco de Portugal ran a bilateral cooperation initiative with Bosnia and Herze-
govina to develop market conduct supervision in that country. The initiative was held as part of the
Eurosystem Programme ‘Strengthening Macro- and Micro-prudential Supervision in EU Candidates and
Potential Candidates’, and involved an initial diagnosis of the country’s situation and the most urgent
needs for protecting banking services customers in Bosnia and Herzegovina, the drafting of a report
containing concrete proposals for the development of market conduct supervision and various specifi c
training courses to support execution of the proposals in the report.
24 See Box 2. Key developments in the IMF agenda.
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1.8.6. Cooperation with other national authorities
Banco de Portugal takes part in the National Committee for Financial Stability (CNEF), the National
Council of Financial Supervisors (CNSF), the National Council for Audit Supervision (CNSA) and the
Investor Compensation System (SII).
National Committee for Financial Stability
Comité Nacional para a Estabilidade Financeira - CNEF (National Committee for Financial Stability) is a
body for the exchange of information and collaboration on the topic of fi nancial stability, comprising the
Minister for Finance, who chairs the committee, the Governor of Banco de Portugal, the Chairman of
the Instituto de Seguros de Portugal – ISP (Portuguese Insurance and Pension Funds Supervisory Autho-
rity) and the Chairman of Comissão do Mercado de Valores Mobiliários - CMVM (Portuguese Securities
Market Commission). The 8th Meeting of the CNEF was held in 2011, which debated the outlook for
banking sector fi nancing and liquidity, as well as the situation and outlook for the fi nancial system at
national and international level.
National Council of Financial Supervisors
Conselho Nacional de Supervisores Financeiros – CNSF (National Council of Financial Supervisors) is a
forum for coordinating the fi nancial supervision authorities’ activity, chaired by the Governor of Banco
de Portugal, comprising the following members: the Vice-Governor of Banco de Portugal responsible for
banking supervision, the Chairman of CMVM and the Chairman of ISP. During 2011, the CNSF addressed
various matters of common interest:
• Regular analysis of the situation and risks of Portugal’s fi nancial system and outlook for the future
• Monitoring of cross-cutting legislative initiatives by the European Commission and coordination of
the application of the standards adopted
• Coordination of the national supervisors’ participation in the ESRB and the ESAs
• Coordination in the area of fi nancial literacy and, more specifi cally, in promoting and developing
the National Plan for Financial Education and in creating the respective portal on the internet.
National Council for Audit Supervision
Conselho Nacional de Supervisão de Auditoria – CNSA (National Council for Audit Supervision) comprises
the three supervisory authorities of the fi nancial sector, Ordem dos Revisores Ofi ciais de Contas – OROC
(Portuguese Institute of Statutory Auditors) and Inspeção-Geral de Finanças (Portuguese Inspectorate
General of Finance), operating using resources supplied by these entities. In 2011 the CNSA’s activities
essentially involved conclusion of three inspection programmes on the audit fi rms and deepening super-
vision of the quality control processes undertaken by OROC in the 2011/2012 cycle. Contact with its
counterpart authorities also intensifi ed, both in the EU and in third countries.
Investor Compensation Scheme
Sistema de Indemnização aos Investidores – SII (Investor Compensation Scheme) was created by Decree-
-Law No 222/99 of 22 June 1999, with the remit of providing investors with the means of compensation
for rights that may not be satisfi ed due to the fi nancial situation of the company providing the investment
services. It is compulsory for investment companies and credit institutions, based in Portugal and authorised
to make investment operations, to take part in the SII. The SII is administered by an executive committee
comprising a member of the Securities Market Commission as chairman and two other members – a
member of the Board of Directors of Banco de Portugal and a member nominated by the Minister for
Finance. This committee meets at least once a month.
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BOX 2 | KEY DEVELOPMENTS IN THE IMF AGENDA
In an ever more interconnected world economy, the G20 and IMF agenda has focused on the short-term
response to the worsening fi nancial and economic situation, the strengthening of the global fi nancial
safety nets, the development of a more comprehensive view on the reform of the international monetary
system and on the role of the IMF. Banco de Portugal participates in the work of the European organisations
where these issues are monitored, and also takes responsibility at national level for Portugal’s relationship
with the IMF.
The stronger and expanded New Arrangements to Borrow (NAB) became effective in March 2011,
following the adoption by the IMF’s Executive Board of the decision that defi nes the NAB’s new operational
model and the completion of internal approval procedures by all members, including Banco de Portugal.
These credit arrangements between the IMF and a set of countries and institutions aim to provide
supplementary resources to the IMF when these are needed to increase quota resources. After the G20’s
commitment in 2009, the number of countries taking part in the NAB increased to 40 and the total
amount of fi nancing increased to SDR 369.997 billion. Banco de Portugal participates in the NAB with a
credit line of SDR 1.542,13 billion. In 2011, the NAB was activated twice, for six-month periods starting
in April and October. The bilateral loan agreement between Banco de Portugal and the IMF, signed in
November 2009, expired in December 2011.
After the IMF’s Board of Governors adopted Resolution 66-2 in December 2010, regarding the 14th
General Review of Quotas and Reform of the Executive Board, the national ratifi cation procedures began
during 2011. The IMF member countries must take the steps necessary to complete these ratifi cation
procedures, to allow the Amendment to the IMF’s Articles of Agreement and the amendments arising
from the 14th General Review of Quotas to become effective in time for the Annual Meetings of 2012.
The total sum of the Fund’s quotas will increase from SDR 238.4 billion to SDR 476.8 billion. Once this
increase has taken place, the sums available under the NAB will be reduced, thereby ensuring that the
IMF remains a quota-based institution. In Portugal’s case, the IMF quota will increase from SDR 1,029.7
million to SDR 2,060.1 million. The ECB has already been consulted about the quota increase, and the
legislative process for ratifi cation of the Amendment to the IMF’s Articles of Agreement on the Reform
of the Executive Board is currently under way.
The IMF’s action plan involves surveillance as one of the priority intervention areas in the short term,
with a focus on policy guidance, particularly in relation to the vulnerabilities in the fi nancial sector, fi scal
policy, public debt and growth, giving particular attention to the weaknesses and spillovers from the
main economies.
The Consolidated Multilateral Surveillance Report, the IMF’s new multilateral supervision product, was
presented at the annual meetings. This report is the result of the drive to monitor the global economy
and the IMF member countries’ economies, with a greater emphasis on the systemic aspect, and is a
step forward in integrating and increasing the consistency of the main policy messages. In 2011, spillover
reports were published for the fi rst time as a test, covering the euro area, the United States, China, Japan
and the United Kingdom. This work culminated in a consolidated report which highlighted the main policy
messages for the global debate, within the context of an increasingly interconnected world economy.
The overarching theme of the Triennial Surveillance Review, which took place in 2011, was making the
IMF’s surveillance as interconnected as the global economy. This comprehensive review exercise was the
fi rst opportunity to take a top-down view of the IMF’s surveillance activity and take stock of the situation,
analysing the recent initiatives following the fi nancial crisis. As a result of this review, the following priorities
were defi ned for the future: (i) regular analysis of spillovers and cross-border issues; (ii) increased and
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1systematic handling of risk analysis; (iii) increased focus on fi nancial stability in bilateral and multilateral
surveillance, adopting a strategic action plan; (iv) increased external stability assessments; (v) review of
the legal framework for surveillance; and (vi) promotion of greater infl uence/impact on policy.
In the wake of the international fi nancial crisis, the IMF took part in the strengthening of the global
fi nancial safety nets, adapting further its operational instruments to support its member countries and
moving towards a better use of its fi nancial facilities for the effective needs of its members, especially in
response to the liquidity needs of countries with strong fundamentals affected by systemic disturbances. The
Precautionary Credit Line (PCL) changes approved in November 2011 aimed to promote the fl exibility and
scope of the IMF’s fi nancial facilities, allowing them to be approved both where no balance of payments
problems exist (for precautionary purposes) and where there are actual balance of payments needs. The
option of using the credit line for a period of six months was also introduced, alongside the existing
arrangements of one to two years, to accommodate countries with short-term balance of payments
needs (potential or actual). As a result of its new nature, the PCL was renamed PLL, ‘Precautionary and
Liquidity Line’. A new and more fl exible instrument was also agreed on that date, the Rapid Financing
Instrument (RFI), which consolidates emergency assistance.
In November 2011, the G20 Heads of State or Government gathered in Cannes to review the progress
reached in implementing the commitments assumed previously. They approved conclusions regarding
redesign of the international monetary system, including the management of capital fl ows, common
principles for cooperation between the IMF and the regional fi nancial arrangements, and an action plan
for local currency bond markets. Guidance also arose from this meeting for the IMF’s supervisory areas
and fi nancing instruments, for the future review of the SDR basket and for the assessment of global
liquidity, of capital fl ow management and reserve accumulation.
The adequacy review of the IMF’s resource levels also featured among the conclusions at the Cannes
Summit and in the discussions regarding safeguarding of world fi nancial stability and the strengthening
of the safety nets, to ensure that the Fund continues to carry out its systemic role. On this matter, the
EU ministers of fi nance confi rmed on 19 December 2011 an additional contribution of EUR 150 billion
from the euro area countries, in the form of bilateral loans.
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2. EFFECTIVE AND FULLY-FLEDGED CONTRIBUTION
TO THE BANK’S FUNCTIONS AS MONETARY AUTHORITY
WITHIN THE FRAMEWORK OF THE EUROSYSTEM
In compliance with its second Strategic Guideline, in 2011 Banco de Portugal was fully involved in the
activities of the Eurosystem and the European System of Central Banks (ESCB). Its participation covered
the different shared Eurosystem/ESCB tasks, notably in terms of economic research and advice, implemen-
tation of monetary policy, management of offi cial foreign reserves and gold, payment systems, currency
issuance, statistics and reporting tasks, and international relations and cooperation. In this latter fi eld,
relations with Portuguese-speaking countries were particularly deepened. The following sections present
the main developments recorded in each of these areas in the course of 2011.
2.1. ECONOMIC RESEARCH AND ADVICE
In 2011, as in recent years, Banco de Portugal undertook its economic research and advice activities
according to three main objectives:
i) Participation in the Eurosystem’s monetary policy decision-making process, chiefl y through advice
to the Governor;
ii) Analysis and forecast of developments in the Portuguese economy; and
iii) Analysis and monitoring of fi nancial markets and the fi nancial system, at both macro-prudential and
microeconomic level.
Advice to the Governor of Banco de Portugal requires regular monitoring of the euro area economy and
its international environment, and also the issue of technical opinions (including in the legal fi eld) on all
relevant matters in monetary policy discussions within the Eurosystem.
Pursuant to the Statute of the European System of Central Banks and of the European Central Bank,
the Governor takes part in the decision-making process of the Governing Council of the ECB, its main
decision-making body, composed of the governors of the euro area national central banks (NCBs) – who
participate on a personal and independent basis – and the members of the ECB’s Executive Board. The
Governing Council meets, as a rule, twice a month: the fi rst of these monthly meetings focuses on euro
area monetary policy and the second on other themes covered by the respective mandate. The Governor
of Banco de Portugal is also a member of the General Council of the ECB, which comprises the President
and Vice-President of the ECB and the governors of all ESCB NCBs. In 2011 the General Council met as
usual every quarter. The General Council’s agendas covered analysis of the EU economic, monetary and
fi nancial situation, fi scal developments, the functioning of the Exchange Rate Mechanism (ERM II), and
the preparation of international forum meetings.
The preparation, technical monitoring and implementation of the Governing Council’s and General
Council’s decisions involve a number of structures, especially the Eurosystem/ESCB committees. In 2011
the Bank continued to ensure representation in these committees and in most of their sub-structures,
participating in their meetings, collaborating in the preparation of institutional reports, and monitoring
any other procedures underlying decision-making. In this context, institutional representation requires
considerable allocation of Banco de Portugal’s resources both as regards face-to-face or teleconference
meetings and the high number of written procedures and all the related work (Table 2.1.).
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INSTITUTIONAL REPRESENTATION OF BANCO DE PORTUGAL IN 2011
No of structures and
sub-structures
No of meetings and teleconferences
Face-to-face Teleconferences
Eurosystem/ESCB 125 430 344
European Union 85 261 67
Portuguese-speaking countries 10 14 0
IMF 2 2 0
BIS 4 13 18
OECD 7 12 2
Other 22 33 0
Total 255 765 431
Source: Banco de Portugal.
The work of the various Eurosystem/ESCB committees covers most central banking activities, in
particular economic analysis, statistical production and monetary policy implementation, notably at
payment systems level25, and accounted for around two thirds of the total number of international
meetings in which the Bank took part (largely teleconferences).
At reporting level, the Bank played an important part in the Eurosystem’s spring and autumn forecast
exercises, in addition to the regular reporting of statistical or operational information.
The Bank also continued to actively participate, on a regular basis, in the works of the EU’s Economic and
Financial Committee (EFC) and its sub-committees (Sub-Committee on IMF Issues, Sub-Committee on
EU sovereign debt markets and Euro Coin Sub-Committee). This activity continued its intensity in 2011,
given the importance of monitoring the economic and fi nancial situation of Member States and the EU,
coordinating EU positions at international level and preparing ECOFIN Council’s works and decisions,
including its informal meetings (where NCB governors participate). The Governor participated in the
informal ECOFIN Council meetings in Budapest-Gödöllő and Wroclaw.
2.2. MONETARY POLICY IMPLEMENTATION
The Eurosystem’s monetary policy in 2011 was strongly affected by the deterioration of the international
and euro area environment, intensifi ed contagion risks and high uncertainty. With the purpose of
maintaining price stability in the medium term, the ECB adopted a policy that included, in addition to
interest rate-related decisions, a series of temporary non-standard measures aimed at avoiding adverse
effects on the monetary policy transmission mechanism, supporting bank credit and ensuring liquidity
in the euro area money market. Central banks carried out coordinated action at international level to
address pressure in world money markets, notably by establishing reciprocal swap lines.
25 The Bank’s international institutional representation activity in 2011 is summarised in Annex A.2.1.-Table 1.
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Notwithstanding the drive to reduce refi nancing from the Eurosystem for the duration of the Economic
and Financial Assistance Programme, as was requested of resident institutions, as alternative market
fi nancing sources were still unavailable, the ECB’s policy of fully meeting demand in refi nancing operations
and conducting operations for relatively long maturities continued to be instrumental.
Hence, in 2011 resident institutions had an average refi nancing share – via main refi nancing operations
(MROs) and longer-term refi nancing operations (LTROs) – of 9% (5% in 2010) of the Eurosystem average
outstanding amount. In terms of the maturity structure, in 2011 around 61% of average refi nancing
was obtained by resident institutions for maturities of over one week, i.e. below the share recorded in
2010 (74%) but not too different from that seen at Eurosystem level (69%).
Still as regards non-standard measures, in 2011 liquidity-absorbing fi ne-tuning operations with a weekly
maturity continued to be used, with the purpose of neutralising liquidity provided by the Securities Market
Programme (SMP), which was stepped up in 2011.
In the second half of the year, new non-standard measures were introduced: a new euro area Covered
Bond Purchase Programme (CBPP), refi nancing operations with maturities of one and three years and the
temporary suspension of the minimum credit rating threshold applied by the Eurosystem to marketable
debt instruments issued or guaranteed by the Portuguese Government (similar to the Greek or Irish
cases)26. Furthermore, two measures were decided on and have already entered into force in 2012: (i) the
possibility of NCBs temporarily accepting, as collateral in Eurosystem credit operations, credit claims in the
form of bank loans fulfi lling specifi c eligibility criteria previously approved by the Governing Council of
the ECB, Banco de Portugal having submitted specifi c proposals within that scope; and (ii) the reduction
of the reserve requirement ratio from 2% to 1%.
These changes in monetary policy also had repercussions on IT systems, which are being adapted to the
new operations and enhanced for the existing systems (see Section 3.3.).
In 2011 Banco de Portugal continued to be responsible for forecasts on the resident banking system’s
liquidity, therefore contributing to gauging the euro area’s overall liquidity needs. In turn, collateral
performance continued to be monitored (including regular review of the regulatory framework), as well
as the plans to reduce the dependence of resident institutions on Eurosystem funding, which proved to
be instrumental to the implementation of monetary policy. In fact, within the scope of the Economic and
Financial Assistance Programme, Banco de Portugal is also entrusted with monitoring and coordinating
the execution of measures to eliminate fi nancing imbalances in the resident banking system, notably by
ensuring a gradual and orderly deleveraging process.
With regard to liquidity needs forecasting, regular contacts with counterparties continued to play a
special role in the gauging of the money market’s operating conditions and the monitoring of strategies
for participating in monetary policy operations. The results of such contacts were refl ected on a weekly
basis in the ECB’s Money Market Surveillance Report. Keeping an extended list of eligible counterparties
for fi ne-tuning liquidity management operations has contributed to ensuring fi nancial stabilisation and
concomitantly to the normalisation of the monetary policy transmission mechanism, particularly important
at this stage of the sovereign debt crisis.27
26 Decision of the European Central Bank of 7 July 2011 (ECB/2011/10).27 Of the institutions directly subject to the reserve system in Portugal, 38 (58%) are considered as counterparties in both open market
operations and standing facilities, since they fulfi l the operational criteria allowing for access to this type of operation and requested to have access to them.
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Finally, Banco de Portugal made an important contribution to the Euro Money Market Survey, conducted
by the Eurosystem on an annual basis, in which a panel of 14 Portuguese resident counterparties
participate. The Bank also took part in discussion forums on the impact of Basel III legislation on liquidity,
recourse to monetary policy operations and the functioning of fi nancial markets.
2.3. ASSET MANAGEMENT
2.3.1. ECB’s foreign reserve management
In 2011 the management of the ECB’s foreign reserves continued to be decentralised, under an agency
agreement signed between the ECB and the Eurosystem NCBs in compliance with the rules, procedures
and guidelines defi ned by the ECB. Under the currency specialisation model and for the sixth consecutive
year, Banco de Portugal was responsible for the active management of a Japanese yen portfolio, which
at the end of 2011 was equivalent to €1,106 million, according to the rules for the allocation of shares
in foreign reserves.
2.3.2. Management of the Bank’s own investment assets
In a year marked by ongoing tensions in international fi nancial markets, notably debt markets in various
euro area countries, Banco de Portugal continued to pay close attention to credit risk in the pursuit of
its objective of maximising profi tability in investment asset management.
The overall asset portfolio at end-2011 was valued at €31,173 million, representing a year-on-year decline
of around 4% (Table 2.2.).
Table 2.2 EUR millions
OWN INVESTMENT ASSET PORTFOLIO
2010 2011 Change
Trading portfolio 13,500 10,024 -3,476
of which accrued interest 188 79 -109
Net value 13,312 9,945 -3,367
Medium-term investment portfolio 5,989 6,185 196
of which accrued interest 119 118 -2
Net value 5,870 6,067 197
Gold portfolio 12,979 14,964 1,985
Total 32,468 31,173 -1,295
Source: Banco de Portugal.
The change in the value of the euro and foreign currency trading portfolio, valued on a marked-to-market
basis, including accrued interest, was mainly due to a €3,814 million reduction in TARGET liabilities.
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In turn, the medium-term investment portfolio, set up in 2005 and managed and valued on a held-to-
-maturity basis (including amortisation of security premia or discount and accrued interest), amounted
to a slightly higher value at the end of the year compared with the previous year.
Finally, at the end of 2011 the gold portfolio grew 15% in value compared with 2010, accounted for by
a rise in the international price of gold denominated in US dollars (+11.6%) and an appreciation of the
US dollar against the euro (+3.3%). The quantity of gold remained unchanged, totalling 382.5 tonnes.
2.4. STATISTICS AND REPORTING
In 2011 Banco de Portugal continued to improve the quality of its statistics, particularly by reinforcing
the interlinking of micro data in the Central Balance-Sheet Database, the Central Credit Register and
the Securities Statistics Integrated System. In this context, the Bank initiated the integrated use of the
Informação Empresarial Simplifi cada – IES (Simplifi ed Corporate Information) and the results of the
international investment survey, aimed at optimising quality control for individual data obtained via these
two sources28. Statistical use of these databases took on an important role, notably in response to the new
information requirements identifi ed in the Economic and Financial Assistance Programme to Portugal.
Also in statistics, in 2011 Banco de Portugal continued to participate actively in the various international
committees and working groups where it is represented, in the ESCB and other European institutions.
Within this scope, reference should be made to the appointment of the Head of Banco de Portugal’s
Statistics Department as Chairman of the Committee on Monetary, Financial and Balance of Payments
Statistics (CMFB) for a two-year mandate starting on 1 January 2011. This European committee
established in 1991 by a Council Decision is entrusted with assisting the European Commission in drawing
up and implementing work programmes concerning monetary, fi nancial and balance of payments
statistics. Over recent years, the CMFB has played an important advisory role in statistical issues related
to public fi nance statistics (fi scal defi cit and public debt), especially to the excessive defi cit procedure
(EDP). Given its composition and mission, the CMFB is the forum for co-ordination of statisticians from
the National Statistical Institutes and Eurostat on the one hand, and the NCBs and the ECB on the other.
In late November Banco de Portugal organised a workshop entitled ‘Fostering cooperation between
the European Statistical System (ESS) and the European System of Central Banks (ESCB)’. Its purpose
was to interchange national experiences within the scope of interagency statistical cooperation, and
at European level between the European Statistical System and the ESCB. On that occasion the book
‘CMFB: 20 Years Promoting Excellence in European Statistics’ – sponsored by Banco de Portugal – was
published, celebrating the 20th anniversary of the committee29.
28 In this context, new IT systems were also developed, as specifi ed in Section 3.3.29 Section 1 of the book underscores past events, gathering recollections of the Committee’s previous Chairmen. Section 2 is devoted
to CMFB initiatives to meet new challenges, and covers various themes such as cooperation, the new international methodological manuals, the statistical revision policy, the advisory role of the CMFB for EDP issues, the communication of statistics and statistical literacy, strategic priorities and future challenges for the committee.
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Active participation by Banco de Portugal in European statistical institutions was also refl ected in the
assumption by a Deputy Head of the Statistics Department of Banco de Portugal of the chairmanship
of the Task Force on Accessibility of ESCB Statistics (TFA). This task force – set up in December 2010 by
the ESCB’s Statistics Committee (STC) – is entrusted inter alia with issuing recommendations to the STC
to improve accessibility and usability of ESCB statistics, and hence to promote statistical and fi nancial
literacy and the reliability of such statistics.
With regard to balance of payments and international investment position statistics, participation in the FDI
network was reinforced, which is an international network for the exchange of individual information on
direct investment operations, the sharing of information and the reduction of international asymmetries.
In terms of the Central Balance-Sheet Database, the Bank led work developed at European level aimed
at greater harmonisation of the BACH – ESD database (Bank for the Accounts of Companies Harmonised
– European Sectoral references Database) and the stocktaking of the main products and services of
European central balance-sheet databases.
Within the scope of international statistical relations, Banco de Portugal actively participated in a number
of initiatives held in 201130.
2.5. PAYMENT SYSTEMS
In 2011 the activities of Banco de Portugal in the fi eld of payment systems mainly focused on four objectives
i) improving the effi ciency and transparency of retail payment systems in the Interbank Clearing System
(SICOI);
ii) implementing the TARGET2-Securities system;
iii) promoting the implementation of the Single Euro Payments Area (SEPA) in Portugal;
iv) ensuring the smooth operation and management of the use of cheques.
2.5.1. Retail payment systems in SICOI
As its operator, Banco de Portugal is responsible for managing and regulating SICOI, which clears payment
transactions up to EUR 100,000 through cheques, bills of exchange, direct debits, credit transfers and
bank cards.31.
In 2011 the use of electronic payment instruments (direct debits, credit transfers and bank cards)
continued to increase, while the use of paper-based payment instruments (cheques and bills of exchange)
decreased (Table 2.3).
30 These initiatives are listed in Annex A.2.1 – Table 2.31 SICOI is regulated by Instruction of Banco de Portugal No 3/2009 of 16 February 2009, which, among other provisions, establishes
the conditions and types of participation in SICOI, describes clearing and fi nancial settlement procedures and defi nes existing risk mitigation mechanisms.
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Table 2.3 Volume in millions and value in EUR billions
TOTAL TRANSACTIONS IN SICOI
2010 2011 Change (%)
Volume Value Volume Value Volume Value
Total 1,937.3 346.6 2,005.8 343.8 3.5 -0.8
Cheques 95.7 123.7 79.7 106.6 -16.7 -13.8
Bills of exchange(1) 0.2 1.5 0.2 1.4 -14.9 -8.8
Credit transfers 86.4 119.2 102.5 130.3 18.7 9.3
Traditional form 85.5 115.4 101.3 126.2 18.6 9.4
via SEPA(1) 0,9 3,8 1.2 4.1 31.8 7.8
Direct debits(2) 121.2 15.7 127.8 16.9 5.4 8.2
Multibanco ATMs 1,633.8 86.6 1,695.6 88.5 3.8 2.3
Source: Banco de Portugal.
(1) Also includes transations to a value equal to or above €100,000.
(2) Direct debit instructions (DDIs) submitted and not cancelled. Also includes DDIs with a value equal to or above €100,000.
In 2011 the use of credit transfers via SICOI grew markedly both in terms of volume and value of processed
transactions. As a result, the Transferências Electrónicas Interbancárias – TEI (Interbank Electronic Transfers)
subsystem had the highest relative share in SICOI in terms of value of processed transactions (37.9%).
The traditionally predominant Cheque subsystem dropped to second place (31%) (Chart 2.1).
Chart 2.1
RELATIVE WEIGHT OF CLEARING SUBSYSTEMS IN TOTAL VALUE PROCESSED
Source: Banco de Portugal.
In terms of volume of transactions, as in 2010 the Multibanco subsystem (automatic teller machines -
ATMs) continued to play a prominent role, representing 84.5% of total transactions processed via SICOI,
while the Cheque subsystem decreased markedly in recent years, accounting for only 4% in 2011.
Alongside its role as operator of payment systems, Banco de Portugal also acts as partner, promoter and
facilitator of initiatives towards the development of these systems or the establishment of more effi cient
and transparent market practices.
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In this context, work carried out by the Comissão Interbancária para os Sistemas de Pagamentos – CISP
(Portuguese Payment Systems Interbank Commission) and respective working groups in 2011 focused on:
the adaptation of national SICOI subsystems to SEPA, with a view to early SEPA migration; the drafting
of interbank best practice; the analysis of business and operating models of new payment instruments
(e.g. m-payments); and the redesign of payment statistics.
In 2011 Banco de Portugal continued to prepare the Estudo sobre os Custos Sociais dos Instrumentos de
Pagamento de Retalho (Study on the social costs of retail payment instruments) with the aim of supplying
information on the costs to the banking system and traders of providing different payment instruments
in Portugal (cash, cheques, debit cards, credit cards, credit transfers and direct debits). This type of
information is relevant to assess the degree of effi ciency of payment systems. Under the coordination
of the ECB, other EU NCBs are carrying out the same exercise (on the basis of the same methodology).
This exercise is expected to allow for the fi rst time a comparison of the social costs involved in providing
each payment instrument in different European countries.
2.5.2. Developments in the TARGET2-Securities system
In 2011 signifi cant progress was made in the Eurosystem’s TARGET2-Securities32 ((T2S) Programme. In
particular, the Governing Council of the ECB approved a new T2S go-live date (June 2015) in October
2011, as well as the T2S Framework Agreement, which is expected to be signed by the central securities
depositories (CSDs) in the fi rst half of 2012.
At national level, the TARGET2 Interbank Working Group was reactivated in March 2011, which should
contribute to coordinate participants more effectively in the implementation of T2S in Portugal.
The Portuguese T2S National User Group (NUG-PT) met three times in 2011, in order to monitor T2S
developments. The NUG-PT is chaired by Banco de Portugal and includes representatives of Comissão
do Mercado de Valores Mobiliários – CMVM (the Portuguese Securities Market Commission), Interbolsa
(the Portuguese managing entity of securities settlement systems and central securities depository),
Associação Portuguesa de Bancos (Portuguese Banking Association), LCH.Clearnet, SA and several banks
involved in the securities market. The agenda and summary of the NUG-PT’s meetings are published on
the website of Banco de Portugal.
Finally, Interbolsa has created a specifi c forum dedicated to T2S: the Interbolsa T2S Portuguese Market
Forum, which met two times in 2011.
2.5.3. Implementation of SEPA in Portugal
As regards the implementation of SEPA, 2011 was dominated by a debate at European level on a draft
Regulation of the European Parliament and of the Council which will establish the end-date for migration
to SEPA and the technical requirements for credit transfers and direct debits in euro. On 20 December,
the European Parliament and the Council reached an agreement on the draft Regulation. Among others,
a decision was taken on a single SEPA migration end-date (1 February 2014). From this date onwards, all
SEPA credit transfers and direct debits must comply with the technical requirements established in this
Regulation. This legal act is a very important step towards the creation of SEPA and is to be published
at the end of the fi rst quarter of 2012.
32 The purpose of the T2S Programme is to promote the integration of European securities markets, thereby enhancing the harmonisation, effi ciency and exploitation of synergies in TARGET2. T2S will essentially be a technical platform for the provision of security settlement services in central bank money to central securities depositories (CSDs) and through these to the end users (participants in CSDs). T2S is expected to decrease post-trading costs, as well as cross-border settlement costs of securities transactions in order to promote increased integration of market infrastructures.
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Banco de Portugal monitors national migration to SEPA towards the gradual use of new European payment
instruments (the SEPA Credit Transfer (SCT) and the SEPA Direct Debit (SDD)), on the basis of a set of
national and euro area average indicators. According to ECB data, euro area migration of traditional
credit transfers to SCT reached 22.7% in November 2011. At national level, as of December, only 2.8%
of transfers issued from Portugal were in SEPA format.
The slow migration process in Portugal shows that both businesses and private individuals still do not
use the new SEPA payment instruments on a regular basis. Further effort is therefore needed on the
part of Banco de Portugal and the main market players on the supply side (credit institutions) to increase
communication on SEPA and raise awareness among users. Throughout 2011 Banco de Portugal therefore
carried out a set of activities aimed at promoting SEPA awareness (see Section 4). In order to increase
the pace of SEPA migration, Banco de Portugal amended the Regulation on SICOI (Instruction of Banco
de Portugal No 3/2009 of 16 February 2009) to impose the reception of SEPA credit transfers to all
participants in the interbank electronic transfers subsystem, with effect from March 2012.
The effective implementation of SEPA also requires signifi cant progress in the following areas: (i) deve-
lopment of innovative solutions in the European retail payments market based on the internet and
mobile phones; (ii) greater openness and harmonisation of the European card market and (iii) increased
security of payment transactions (for example by discontinuing the use of magnetic strip cards and only
issuing chip cards).
As regards the security of payment transactions, an important step was taken with the creation of a
new forum in 2011 – the European Forum on the Security of Retail Payments (also known as Secure Pay)
by the Governing Council of the ECB. This forum aims to promote cooperation on the security of retail
payments among the relevant European Economic Area authorities in order to detect vulnerabilities and,
where necessary, issue recommendations. Over the year, the work carried out by this forum focused on
the security of payment transactions over the internet (using cards or via home banking).
2.5.4. Management of the List of Cheque Defaulters and the use of cheques
During 2011 the names or business names of 39,809 entities were added to the List of Cheque Defaulters
and the names or business names of 51,193 entities were removed from the list upon expiry of the legal
period or following decision of Banco de Portugal. As at 31 December 2011, the list included 63,844
names and business names, i.e. a 15% decline compared with the end of 2010 (75,228), continuing
the trend observed in 2010.
Under the powers vested in it by the legal framework governing unfunded cheques, Banco de Portugal
analysed 11,584 requests submitted by private entities or directly by credit institutions to have their names
removed from the list or their inclusion on the list cancelled and upheld 6,380 requests for removal and
3,558 requests for cancellation. The Bank’s regional network analysed 40% of total requests, i.e. 3,166
removals and 475 cancellations from the list.
In addition, Banco de Portugal analysed requests from courts on judicial decisions (additional penalties
to prohibit the use of cheques, coercive measures, injunctions) related to the reporting of information
on entities whose name or business name is on the List of Cheque Defaulters.
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2.6. CURRENCY ISSUANCE
In 2011 the Bank continued to promote effi cient and secure use of euro banknotes and coins as a means
of payment by the general public, and to provide quality and effi cient services for the banking system
and other professional cash handlers.
In this context, the main activities of Banco de Portugal within the Eurosystem focus on: (i) the production,
sorting and recycling of euro banknotes; (ii) the monitoring of withdrawals and deposits of banknotes
and coins at the Bank; (iii) the detection of counterfeit banknotes and coins; and (iv) the provision of
cash services.
The State, through the Ministry of Finance, is the entity responsible for issuing coins in Portugal, while
Banco de Portugal ensures they are put into circulation via withdrawals from credit institutions and
exchange operations with the public.
2.6.1. Production of euro banknotes
The ECB is entrusted with the task of establishing the total volume of euro banknotes to be produced
annually, according to the shortages or surpluses indicated by the euro area NCBs. The ECB allocates
to each NCB a share of the total annual production (a maximum of three denominations to achieve
economies of scale). Decentralised banknote production requires the quality of banknotes to be uniform
and high, subject to strict control.
In 2011 Banco de Portugal was responsible for printing 157.9 million €10 banknotes, 144.5 million of
which to meet its own needs and the remaining (13.4 million) to distribute among other NCBs. As in
previous years, the production tender was awarded to Valora S.A., a printing works fully owned by Banco
de Portugal. In compliance with the delivery schedule among NCBs for 2011, Banco de Portugal received
160.6 million banknotes in three denominations (€20, €50 and €200) and sent 44.0 million banknotes
in fi ve denominations (€5, €10, €20, €200 and €500).33
2.6.2. Banknote sorting at Banco de Portugal
Banco de Portugal ensures the authenticity and quality of banknotes in circulation through the sorting
of cash (banknotes are sorted, deducted and destroyed, where required).
Euro banknotes deposited by credit institutions are sorted using a wide range of authenticity and quality
checks which separate fi t from unfi t banknotes.
In 2011 the Bank’s sorting systems processed around 719.5 million banknotes (a decrease of 5.9%
compared with 2010) (Table 2.4).
33 See Annex A.2.6 for other indicators on cash activities in 2011.
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Table 2.4 106 banknotes
BANKNOTES PROCESSED IN THE SORTING SYSTEMS OF BANCO DE PORTUGAL | 2010-2011
Denomination (€) 2010 2011 Δ 2010 - 2011
500 0.65 1.09 67.5 %
200 0.58 0.74 28.4 %
100 5.77 6.67 15.5 %
50 58.21 62.85 8.0 %
20 326.44 309.74 -5.1 %
10 302.13 278.66 -7.8 %
5 70.64 59.72 -15.5 %
Total 764.43 719.48 -5.9 %
Source: Banco de Portugal.
Of total processed banknotes, 504.6 million were classifi ed as fi t for recycling while the remaining bank-
notes were deducted and destroyed. The annual unfi t rate of processed banknotes reached 29.9%, i.e.
a decrease of 10.3 percentage points (p.p.) compared with the previous year (Table 2.5).
Table 2.5 Per cent
DEVELOPMENTS IN THE UNFIT RATE | 2010-2011
Denomination (€) 2010 2011 Δ 2010 - 2011
500 36.7 35.1 -1.6 %
200 35.7 35.7 0.0 %
100 45.6 50.4 4.8 %
50 37.5 30.8 -6.7 %
20 35.0 25.3 -9.7 %
10 36.1 25.1 -11.0 %
5 82.9 72.5 -10.4 %
Total 40.1 29.9 -10.3 %
Source: Banco de Portugal.
The ECB analyses the quality of banknotes in circulation on an annual basis, based on unprocessed
samples of €5 to €100 banknotes from all euro area countries. The fi ndings from this procedure are shown
in Table 2.6. Since 2009 and particularly last year the quality of banknotes in circulation has improved
overall in Portugal and the Eurosystem as a result of the NCBs’ sorting options.
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Table 2.6 Per cent
SHARE OF UNFIT BANKNOTES (SAMPLE) | 2010-2011
Denomination (€) Context 2006 2007 2008 2009 2010 2011
100Eurosystem - - - - 12 8
Portugal - - - - 15 12
50Eurosystem 12 13 13 12 11 8
Portugal 14 18 17 13 15 12
20Eurosystem 16 10 14 11 11 9
Portugal 6 7 11 6 6 3
10Eurosystem 16 16 17 16 14 13
Portugal 5 4 4 3 4 3
5Eurosystem 35 31 37 33 31 26
Portugal 27 32 36 31 23 15
Source: ECB.
Available data show that the quality of lower denomination banknotes in circulation in Portugal (€5, €10
and €20 banknotes) exceeded the Eurosystem average, possibly because these are the most commonly
used denominations in Portugal, and therefore are recycled the most. The absolute deviations between
shares of unfi t banknotes in these denominations in Portugal and the Eurosystem stood between 6 and
11%. By contrast, the sample quality of €50 and €100 banknotes, which are less commonly used in
Portugal, was slightly below the Eurosystem average.
2.6.3. Detection of counterfeit banknotes and coins
In Portugal, 15,841 counterfeit euro banknotes were withdrawn from circulation in 2011, i.e. a decrease
of around 16.1% from 2010 (3,030 banknotes fewer) (Table 2.7). Counterfeit banknotes seized in Portugal
accounted for 2.6% of total banknotes detected in the euro area over the same period.
Table 2.7 Volume of banknotes
COUNTERFEIT BANKNOTES SEIZED IN PORTUGAL | 2010 - 2011
Denomination (€) 2010 2011 Δ 2010 - 2011
500 435 21 -95.2 %
200 176 82 -53.4 %
100 1,088 805 -26.0 %
50 10,155 8,666 -14.7 %
20 5,790 5,597 -3.3 %
10 1,080 540 -50.0 %
5 147 130 -11.6 %
Total 18,871 15,841 -16.1 %
Source: Banco de Portugal.
Analysing the breakdown by denomination, the €50 banknote was seized the most in Portugal (8,666
banknotes), followed by the €20 banknote (5,597 banknotes). These denominations together accounted
for 90% of counterfeits detected in Portugal. The €50 and €20 banknotes also accounted for the highest
number of banknotes seized in the euro area.
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Although detected counterfeits account for an extremely small percentage of total banknotes compared
with the volume of fi t banknotes in circulation, the ECB advises the public to be alert and to check the
banknotes they receive. An analysis of the quality of seized counterfeits indicates that all may be detected
by the public through observation of the security features using the ‘feel-look-tilt’ test described in the
Eurosystem’s offi cial publications and on the websites of the ECB and Banco de Portugal.
As regards coins in circulation, the application of Decree-Law No 184/2007 of 10 May 2007 has improved
the quality of coins in circulation in Portugal and, simultaneously, withdrawn counterfeit coins from
circulation.
The security features of the euro make it one of the world’s safest currencies. Counterfeits are still detected
in circulation, although accounting for a very small percentage compared with fi t coins. In 2011, 4,351
counterfeit euro coins were withdrawn from circulation in Portugal, i.e. a decrease of around 19.7%
from 2010 (Table 2.8).
Table 2.8 Volume of coins
COUNTERFEIT COINS SEIZED IN PORTUGAL | 2010 - 2011
Denomination (€) 2010 2011 Δ 2010 - 2011
2.00 4,208 2,334 -44.5 %
1.00 454 325 -28.4 %
0.50 754 1,692 124.4 %
Total 5,416 4,351 -19.7 %
Source: Banco de Portugal.
Similarly to the other euro area countries, the €2 coin had the highest share of total seized counterfeits,
followed by the €0.50 coin.
As is the case with banknotes, counterfeit coins may not be exchanged for genuine coins. Receiving
a counterfeit as a genuine coin means losing the corresponding face value. It is therefore important
to recognise whether a coin is authentic when receiving it. The public may detect counterfeit coins in
circulation using the ‘feel-look-check’ test.
2.6.4. Common framework for euro banknote recycling
The recycling of euro banknotes is carried out by all professional cash handlers. This activity is regulated
by Decree-Law No 195/2007 of 15 May 2007, in accordance with Council Regulation (EC) No 1338/2001
of 28 June 2001 laying down measures necessary for the protection of the euro against counterfeiting,
and the handling of unfi t banknotes.
The transitional period for the adaptation of credit institutions and other professional cash handlers to
the euro banknote recycling framework ended on 31 December 2010, during which no legal action
could be taken against these entities for not complying with their obligations.
Unlike initial inspections, which were highly educational, on-site inspections by Banco de Portugal in
2011 focused on checking whether the obligations and rules of the euro banknote recycling framework
were being complied with by professional cash handlers.
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On 1 January 2011, Decision of the European Central Bank of 16 September 2010 (ECB/2010/14)
entered into force, establishing adjustments to on-site and off-site inspections. However, Decree-Law
No 195/2007 remains fully applicable, as these adjustments only apply to the testing of euro banknote
recycling machines.
Table 2.9 provides a summary of Banco de Portugal’s cash recycling activities in 2011 compared with 2010.
Table 2.9
CASH RECYCLING
Indicator (number) 2010 2011
Recycling contracts with credit institutions and fi nancial corporations 3 11
Inspections of branches of credit institutions and fi nancial corporations 941 966
Inspections of cash centres of cash-in-transit companies 21 14
Reports analysed (two six-months periods) 128 145
Trainees (e-learning) 4,705 3,906
Equipment testing at the manufacturers’ premises 7 11
Source: Banco de Portugal.
2.6.5. Roadmap for greater convergence of NCB cash services
In February 2007 the Governing Council of the ECB adopted a roadmap consisting of six measures, to
achieve, in the medium term, increased convergence of NCB cash services, thereby meeting the challenges
posed by the European Payments Council (EPC) on the establishment of a Single Euro Cash Area (SECA).
At the start of 2011 Banco de Portugal implemented a Eurosystem measure on the acceptance of side
and orientation-independent banknote deposits as a free-of-charge service at the Madeira and Azores
Regional Delegations, which now accept and deliver banknotes under these conditions. This service will
subsequently be extended to other cash offi ces of Banco de Portugal.
Only one Roadmap measure34 has not yet been fully implemented by Banco de Portugal: the installation
of electronic interfaces between NCBs and the respective credit institutions for deposits and withdrawals
at any NCB. The extension of the integrated management of cash withdrawals and deposits (Gestão
integrada das Operações de Levantamentos e Depósitos de numerário – GOLD) at the Bank’s cash offi ces
to operations ordered by Portuguese credit institutions directed towards other Eurosystem NCBs was
scheduled for 2013, given that it depends on the existence of a common IT platform for all Eurosystem
NCBs and the connection of national systems to this platform.
34 Within this context, Banco de Portugal implemented the following Eurosystem measures throughout 2007: free access for all credit institutions to the cash services of any NCB; the acceptance without restrictions of coin deposits at NCB counters; and the extension of NCB opening hours and/or the adoption of equivalent measures. In 2010 Banco de Portugal implemented a measure on the establishment of common packaging standards at Eurosystem level for cash deposits and withdrawals. The IT application for GOLD was also launched in 2010, allowing the installation of electronic interfaces between NCBs and credit institutions for the communica-tion of deposit/withdrawal orders, although only for domestic transactions.
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2.6.6. Project for the creation of a second series of euro banknotes
Activities envisaged for 2011 under the project for the creation of a second series of euro banknotes
were successfully concluded. Banco de Portugal was represented in Eurosystem working groups and
participated dynamically in some of the project’s activities (specifi cally technical analyses and testing).
The second series of banknotes will retain the ‘ages and styles of Europe’ theme from the current series
with a new design that is easily recognisable by the general public. The banknotes will embed innovative
security features which provide increased protection against counterfeiting.
The new series of euro banknotes will be introduced gradually. The launch of each denomination will
be preceded by public information campaigns promoted by the ECB and the NCBs.
2.7. INTERNATIONAL RELATIONS AND COOPERATION
One of Banco de Portugal’s priorities is to work alongside its counterparts in developing or emerging
economies, particularly the central banks of Portuguese-speaking countries. This activity provides a
platform for exchanging experience and knowledge between the institutions, aligning the Bank with the
Portuguese State’s foreign policy, as well as enhancing its role within the Eurosystem/ESCB framework,
by leveraging its value as a Portuguese-speaking institution.
Banco de Portugal’s cooperation work made notable progress in 2011, expanding its geographical
reach more systematically and increasing the subject areas for cooperation, encompassing the entire
Portuguese-speaking space, including Brazil, and covering other key areas in more depth, such as super-
vision and accounting. The aim was to involve participants in a more shared and intense way, through
the introduction of new formats, namely the sector meetings.
In particular, Banco de Portugal wished to bring its cooperation experience to the European context,
and intensifi ed its monitoring of the international agenda towards developing and emerging countries.
It also intensifi ed its regular monitoring of the macroeconomic and exchange rate developments of the
countries under the agreements in place with the Portuguese State.
One aspect of the cooperation activity is the monitoring of the macroeconomic situation of the deve-
loping or emerging countries, and their respective international agendas, including their participation
in international organisations. Therefore, the Bank continued to draw up various technical projects on
these topics and published another issue of the annual publication Evolução das Economias dos PALOP
e de Timor-Leste (‘Economic Developments in Portuguese-speaking African Countries and Timor-Leste’)
and a new version of the multimedia presentation on the economic situation of all the Portuguese-
-speaking countries.
Another of Banco de Portugal’s areas of involvement with Portuguese-speaking countries is its
participation in the bodies overseeing smooth operation of the Exchange Rate Cooperation Agreement
between Portugal and Cape Verde and the Economic Cooperation Agreement between Portugal and São
Tomé and Príncipe. This work involves the Ministry of Finance, the Ministry of Foreign Affairs and their
counterparts in each of those countries, and continued to make progress in 2011 principally in issuing
regular technical analysis and fostering debate among the bilateral bodies created for the purpose,
in order to promote macroeconomic and fi nancial stability in Cape Verde and São Tomé and Príncipe and
to encourage their economic and fi nancial relations with Portugal and the euro area.
Banco de Portugal’s Cooperation Plan is the key document for guiding and systematising the Bank’s
initiatives in this fi eld, contributing to the coordinated scheduling and execution of these activities.
Traditionally issued annually, the plan involves collaboration from the main external partners – the
Portuguese-speaking countries’ central banks – and most of the Bank’s own internal structures.
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The Plan places particular emphasis on the relationships with the Portuguese-speaking countries’ central
banks, but also covers other developing or emerging countries. In 2011, 110 initiatives were carried out
(109 in the previous year), from technical assistance and training to work visits and internships, among
other formats, which included almost all the central banks’ specifi c functions.
The high point of the cooperation relationships between the Portuguese-speaking countries was once
again the Lisbon Meeting. The 21st Lisbon Meeting took place on 19 September 2011, before the IMF
and World Bank annual meetings, and was attended by the Governors or other senior managers of the
respective central banks.
The Lisbon Meeting included the usual public and restricted working sessions, in which ideas are brainstormed
between representatives from the participating institutions. The 2011 Meeting consolidated the more
focused format introduced the year before. In 2011 the public session’s introductory speeches were
made by the Governors of Banco de Portugal and the Central Bank of Brazil.
The Central Bank of Brazil’s increasing involvement in the cooperation between its counterparts in the
Portuguese-speaking countries is most evident at the so-called sector meetings, which periodically gather
representatives in various specifi c areas from each of the eight Portuguese-speaking central banks.
2011 saw the launch of two important new sector meetings, relating to key areas for central banks: the
1st Accounting, Internal Control Models and Risk Assessment Meeting (in Angola) and the 1st Banking
Supervision Meeting (in Portugal). These initiatives were attached to various events that took place again
in 2011: the 3rd Money-Issue and Treasury Meeting (in Angola), the 13th Human Resources Meeting
(in Cape Verde) and the 13th IT and Communication Systems Forum for the National Central Banks of
Portuguese-speaking Countries (in Brazil)35.
At the time of Banco de Portugal’s 10th Conference on Audit and Management, a meeting also took
place for the audit directors of the Portuguese-speaking countries’ central banks.
35 This forum was also attended by the national central banks of Angola, Brazil, Cape Verde, Mozambique and São Tomé and Príncipe, covering a broad range of issues: IT/systems governance; usage of the Portal dos Bancos Centrais dos Países de Língua Portuguesa – BCPLP (Central Banks’ Portal for Portuguese-Speaking Countries); outsourcing IT/systems services; IT network architecture and security; business continuity plan; and agile development methodology. Banco de Portugal was invited to organise the 14th Forum, which will take place in Lisbon in 2012.
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3. ORGANISATION AND EFFICIENT MANAGEMENT OF RESOURCES
Organisation and effi cient management of Banco de Portugal’s resources is the third of the strategic
guidelines set for the 2011-2013 period. The priorities defi ned for this are as follows: strengthening the
internal organisational model, continuous improvement of business and management processes and
technology used and enhancement and motivation of the Bank’s staff. The following sections outline the
main developments of 2011 in relation to: the institutional model and external audit; internal governance
and risk management; IT and communications systems; human resources management; and budgetary
and premises management.
3.1. INSTITUTIONAL MODEL AND EXTERNAL AUDIT
In June 2011 the IMF carried out the so-called Safeguards Assessment36 - as required under the Economic
and Financial Assistance Programme, on the key components of Banco de Portugal’s governance and
control system, covering the following aspects: external audit, legal framework and independence,
fi nancial reporting, internal audit and internal control system.
Under this, although the IMF believed that the current institutional model had suffi cient guarantees,
it recommended changes to Banco de Portugal’s Organic Law to strengthen various aspects of the
governance and control system, including the Bank’s independence conditions. Implementation of the
IMF’s recommendations is currently being prepared, taking into account international best practice and
collective experience from the Eurosystem.
The IMF also recommended the broadening of the supervisory powers vested in the Bank’s control
structures. To this end, the Board of Auditors Charter of Banco de Portugal was approved in December
2011, addressing the Board of Auditors’ roles, specifi cally in its relations with the Board of Directors.
Banco de Portugal’s public tender for external audit services came to a conclusion in 2011 also. Following
the recommendation of the European Central Bank of 25 August 2011, the Council of the European
Union approved Pricewaterhouse Coopers & Associados – Sociedade de Revisores Ofi ciais de Contas,
Lda. by decision on 11 October 2011 as Banco de Portugal’s external auditor for the fi nancial years
2011 through 2016.
3.2. INTERNAL GOVERNANCE AND RISK MANAGEMENT
The critical nature of the Bank’s tasks as central bank and fi nancial supervisor and regulator confer
particular importance on the organisational structure of the Bank; robustness of internal governance
and control mechanisms; operational risk management; and compliance.
The Bank has developed several initiatives to enhance the credibility, security and robustness of its
processes in four main fi elds: adaptation of the Bank’s organisational structure; development of cross-
-cutting processes for operational risk management; improvement of the internal audit system; and
reinforcement of the principles of integrity and ethical values. The following subsections describe the
main measures adopted in each fi eld.
36 An IMF member wishing to receive IMF fi nancing must provide assurance of its ability to manage the resources provided in a suitable manner, and of the reliability of the information reported. The IMF assesses these assurances in collaboration with the national central bank where the accounts are based, through which the operations needed for the fi nancing are processed. That process is called Safeguards Assessment. Information on this kind of process may be obtained on the IMF site (www.imf.org).
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3.2.1. Organisational structure of Banco de Portugal
The Bank must continuously adapt its organisational and functional structure to keep pace with business
developments and to incorporate best practice in governance and management. The main changes to
the Bank’s organisational structure in 2011 are as follows:
• Creation of the Risk and Security Commission (CRS), chaired by a member of the Board of Directors,
whose main mission is to promote, coordinate and consolidate information on the operational risk
management process at Banco de Portugal, including overall security policies and control at all levels;
• Creation of the Risk Management Unit (UGR), responsible for identifying and assessing the risks
associated with the Bank’s operational activity, which reports directly to the Board of Directors;
• Creation of the Budget Monitoring Commission, chaired by a member of the Board of Directors,
which permanently monitors the Bank’s administrative budget, with the aim of promoting effi cient
management of resources and the rational and sustained containment of operating costs;
• Restructuring of the Organisation and Information Technology Department and the Administrative
Services Department;
• Restructuring of the Offi ce of the Governor, reinforcing its specialist personnel and creation of the
Institutional Communications Offi ce.
The internal reorganisation of the supervisory functions of Banco de Portugal was approved in 2010
and entered into force in 2011. This reorganisation separated the tasks previously concentrated in the
Banking Supervision Department into three distinct departments: Banking Prudential Supervision Depart-
ment (DSP), Banking Conduct Supervision Department (DSC) and Legal Enforcement Department (DAS).
The reorganisation of the banking supervision carried out by Banco de Portugal refl ects the guidelines
and recommendations of several international bodies and of the European Union. Like other EU NCBs,
Banco de Portugal follows best practice and lessons learnt from the international fi nancial crisis that
began in 2007.
The following is the Bank’s organisation chart as at 31 December 2011:
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3.2.2. Operational risk management and Business Continuity Plan
Since the end of 2009, the Bank has been developing a cross-cutting process of ‘Operational Risk
Management’, in order to prevent the occurrence of events that could seriously harm the Bank’s fi nancial
situation, its image and reputation or its ability to achieve its goals.
This process began with an exhaustive identifi cation of the Bank’s business and management functions,
followed by the identifi cation and characterisation of associated main operational risks and the defi nition
of mitigation measures. The identifi cation and analysis of main risks were largely completed in 2011.
These include, among others, human error and failure, system unavailability, irregularities, disasters and
attacks. The main factors underlying these risks are staff, governance and business processes and, to a
lesser degree, third-party actions.
An effective internal control system requires material risks which may limit the Bank’s ability to adequately
fulfi l its mission to be identifi ed and permanently monitored. Within this context, the Bank developed
a process for recording incidents. This is supported by an IT application which was subject to several
improvements in 2011, in order to enhance security, facilitate its use and increase available information.
In addition, a system to record and analyse risk indicators and a specifi c risk assessment process for
projects developed by the Bank are expected to be implemented in 2012. These will allow the outcome
of the risk identifi cation and analysis to be combined with actual events, thereby supporting and justifying
management measures and controlling their real effects.
In addition to developing overall and high-level processes in operational risk management, Banco de
Portugal has also invested in appropriate maintenance of the Business Continuity Plan and other plans
ensuring the smooth operation of the Bank in the event of a disruption. In 2011 Banco de Portugal
carried out two real-time disaster simulations, with distinct technical and functional purposes, covering
most business functions and all business functions requiring up to 48 hours recovery time. The Bank also
defi ned two testing periods, which included recovery state procedures within the scope of the Business
Continuity Plan.
A study was also conducted on the ‘Business Continuity Plan Update’ to identify development needs
which ensure implemented solutions are operational at all times. The organisational and technical
proposals that resulted from this study are expected to be implemented throughout 2012 and 2013.
In technological terms, the Bank considers virtualizing its personal computers, in order to manage
workstations more effectively.
3.2.3. Internal audit
In June 2011 the Board of Directors approved a revision of the framework regulating the internal audit
activity, in order to improve internal communication on its outcomes.
In operational terms, 2011 was marked by the implementation of an audit programme (in the fi elds
of accounting and fi nance, operations and IT) based on a plan approved by the Board of Directors of
Banco de Portugal and a programme at Eurosystem level approved by the Governing Council of the ECB.
As shown in Table 3.1, of the 42 audits carried out in 2011, 36 were internal and six related to systems
that are common to or shared with the Eurosystem.
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Table 3.1
INTERNAL AND ESCB AUDITS
Internal
audits
ESCB
auditsTotal
Direct support to the Board of Directors 1 1 2
Direct support to the Board of Auditors 3 3
Horizontal actions within the Bank 2 - 2
Markets and reserve management 3 1 4
Issue and treasury at the head offi ce, Oporto branch, regional delegations and agencies
7 1 8
Payment systems and operations 2 1 3
Statistical production and economic research 3 1 4
International relations 1 - 1
Legal services 1 - 1
Information technologies 4 1 5
Human resource management activities and administrative support
5 - 5
Accounting and fi nancial control 2 - 2
Sociedade Gestora dos Fundos de Pensões do Banco de Portugal (Pension Funds Managing Company)
2 - 2
Total 36 6 42
Source: Banco de Portugal.
The measures resulting from past audits were also monitored to ensure issued recommendations were
appropriately implemented.
3.2.4. Principles of integrity and ethical values
During the fi rst half of 2011 the Bank carried out several studies to improve the ethical and conduct
framework of its staff and the monitoring of its Code of Conduct. These studies led the Board of
Directors to formally create the fi gure of the Ethics Adviser (appointed in July). In 2011 the Ethics Adviser
performed a number of comparative analyses of both the Codes of Conduct applicable to other NCBs
and the updates to the Code of Conduct of the ECB, with a view to drafting a project to adjust the
Code of Conduct of Banco de Portugal. A presentation was made to new staff members as part of the
dissemination of the ethical principles applicable to the Bank.
3.3. INFORMATION AND COMMUNICATION SYSTEMS
Measures and projects carried out in 2011 under information and communication systems and technologies
were guided by the goals of streamlining work processes and containing costs across the institution.
The Bank’s Organisation and Information Technology Department (DOI) was restructured with the
following aims: improve the timeliness and quality of the Department’s response to internal and external
requests; promote more effi cient public procurement management platforms and services to be used
across the Bank; implement risk assessment processes for information and communication systems and
technologies supporting the Bank’s business activities; and promote the integrated development of
system and technology architectures used at the Bank.
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In 2011 the Bank implemented a new model to plan and manage information system and technology
projects, continuing the work that began in 2010 and aiming to align with best practice within the
Eurosystem. The new model is based on a detailed description of proposed projects, identifying associated
costs, as well as their strategic framework, potential benefi ts for the Bank’s business, stability of
requirements and technological impact. In addition, the fi nancial and material implementation of projects
is regularly monitored, in particular as regards those that are costlier or have more strategic relevance
in human resource and fi nancial terms.
In the fi eld of communications, Banco de Portugal started reinforcing its videoconferencing infrastructure
to hold work meetings with teams at different locations, as well as increase effi ciency and reduce the
number of staff missions and associated costs. In addition, the Bank continued to work on ‘unifi ed
communications’ solutions, combining different communications solutions (audio, video and text).
In the last quarter of 2011 the Bank started a pilot project involving a limited number of staff members
at different Bank locations.
In 2011 the Bank made some adjustments to its new document management and electronic archive
system (@DOC), which is based on the Livelink platform (also used by the ECB), in particular with
regard to handling sensitive information, in light of the guidelines of the Governing Council of the ECB.
In addition, a module to handle and manage the minutes of Board meetings was made available at
@DOC, as a result of the migration of the former document management solution.
In addition to cross-cutting projects, a number of projects were developed in 2011 to respond to the
more stringent data handling requirements in the areas of prudential supervision, monetary policy
implementation, statistics and the relationship with the banking system.
In the fi eld of supervision, the Bank fi nalised a project to redesign the supervision data exploration
system, which equipped the existing tool with automatic mechanisms to validate the quality of
information received from institutions and to improve effi ciency in consultation and exploration,
specifi cally as regards the automatic production of quarterly information sheets for each institution and
the quarterly banking system report.
In view of the needs arising from the Special Inspections Programme, Banco de Portugal also developed
a tool to validate the amount of risk-weighted assets (RWA) and expected loss (EL) for institutions that
adopt the Internal Ratings Based Approach (IRB approach). This tool has high potential and usefulness
both for off-site validation of RWA and EL amounts and to achieve greater range and precision in a
number of analyses (i.e. stress tests, criteria and outcome benchmarking, anticipation of the impact of
regulatory changes or changes in the economic environment).
As regards monetary policy implementation, Banco de Portugal has been aligning its support infrastructures
to infrastructures under development by the Eurosystem in view of growing turnover and changes to
the framework of collateral and credit operations. In particular in 2011 the Bank introduced changes to
three types of integrated information systems used to support the monetary policy function: SITEME37,
(altering the collateral management system, tender system and recourse to Eurosystem standing facilities),
the EADB@BdP (securities eligibility) application and the CRM (minimum reserve control) application.
The Bank also changed and improved non-integrated departmental applications, which support activities
related to the daily forecast of liquidity in the Portuguese banking system and started projects in order
to adapt to new Eurosystem platforms, such as TARGET2-Securities (T2S) and Correspondent Central
Banking Model 2 (CCBM2).
37 Market Electronic Transfer System.
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In the fi eld of statistics, in 2011 the Bank fi nalised the development of a solution for the analytical
exploration of data in the Central Credit Register. As with the Central Balance-Sheet Database, the Central
Credit Register database now is also integrated in the statistical data warehouse under development at
the Bank, making the integrated exploration of information from several statistical domains easier. Based
on fi ndings from previous studies, the Bank introduced changes to two other modules to be integrated
in this data warehouse in the future: the Securities Statistics Integrated System and the integrated system
of balance of payments and international investment position statistics.
In 2011 the Bank carried out an IT intervention to adapt the information system of the Central Balance-
-Sheet Database to the accounting normalisation system. This is essential to integrate data for 2010
provided through the Informação Empresarial Simplifi cada – IES (Simplifi ed Corporate Information) in
the Bank’s database. The quality control procedures and production system of the Central Balance-Sheet
Database were also redesigned in light of the new accounting rules.
3.4. HUMAN RESOURCE MANAGEMENT
In human resources, Banco de Portugal focuses on maintaining a specialised team capable of
responding sustainably in the medium to long term to the new challenges and responsibilities entrusted
to it, especially in supervision and regulation of the fi nancial system and under the Economic and Financial
Assistance Programme to Portugal.
The Bank has therefore focused on recruiting staff with the required skills and enhancing the
qualifi cations of its staff. Recruitment and selection approaches have diversifi ed, covering internal
and external candidacies, internal mobility and exploitation of staff’s potential, executive search and
spontaneous applications. In turn, compensation and benefi ts policy and human resource development
policy have favoured merit and professional and academic qualifi cation, with the aim of stimulating the
motivation and professional fulfi lment of the Bank’s staff.
Naturally, Banco de Portugal is aware of the diffi cult context facing Portuguese society. For this reason,
in 2011 the Board of Directors of Banco de Portugal decided, autonomously and as a gesture of solidarity,
to join the effort that the country is making, adopting salary containment measures resulting in an
overall saving equivalent to that of the measures defi ned in the 2011 State Budget Law. This approach
will continue in 2012.
3.4.1. Staff composition
At the end of December 2011 the number of staff employed by Banco de Portugal was 1,689, i.e. a net
increase of 41 (around 2%) compared to the end of 2010, when the number of employees that retired
was higher than normal. 53 employees left the Bank in 2011 (47 retirements and six terminations of
labour contracts), while 94 were recruited.
Despite the increase in 2011, the number of staff has been declining in the past decade (a decrease of
around 7%). At the end of 2011, the number of employees was broadly the same as at the end of 2007,
although the tasks entrusted to Banco de Portugal have signifi cantly increased (Chart 3.1).
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Chart 3.1
STAFF DEVELOPMENTS
Source: Banco de Portugal.
In 2011 the ratio of males to females continued to become more balanced. At the end of the year, 52%
of total staff were male and 48% female (Table 3.2).
Table 3.2
STAFF DEVELOPMENTS
2007 2008 2009 2010 2011
DevelopmentsStaff 1,687 1,685 1,713 1,648 1,689
% change -1.2% -0.1% 1.7% -3.8% 2.5%
GenderMale 930 927 915 865 879
Female 757 759 798 783 810
MovementsRecruitments 21 54 96 80 94
Retirements 33 46 64 137 47
Source: Banco de Portugal.
As at 31 December 2011 the number of retired staff was 1,872, eight more than in 2010, while pensioners
numbered 532, stabilising from the previous year.
The Bank’s staff has been rejuvenated as a result of a high number of retirements in the past years and
new recruits (Table 3.3 and Chart 3.2). In 2011 the average age of staff decreased further, to 45.6 years
at the end of the year (-0.3 years compared to 2010). The average age of male and female employees
was 46.8 and 44.2 years respectively. The 46-55 age group had the highest share (619 employees),
followed by the 36-45 age group (267 employees). From 2007 to 2011, the share of employees under
35 increased from 15 to 27%, while the share of employees over 45 decreased from 69 to 58%.
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Table 3.3
AGE GROUP DEVELOPMENTS
Age group 2007 2008 2009 2010 2011
[19;25] 22 23 58 66 77
[26;30] 106 121 151 177 208
[31;35] 129 129 134 147 165
[36;45] 261 256 263 264 267
[46;55] 786 764 713 672 619
[56;60] 253 257 266 244 260
[61;64] 126 130 124 74 90
>=65 4 5 4 4 3
Total 1,687 1,685 1,713 1,648 1,689
Source: Banco de Portugal.
Chart 3.2.
AGE GROUPS | BROKEN DOWN BY GENDER | 2011
Source: Banco de Portugal.
Given the responsibility and complexity of the Bank’s role, staff members must have a high level of
education. As at 31 December 2011, 60% of staff members had a graduate degree and the share of
employees with a PhD or a Master’s degree increased compared to 2010 (Chart 3.3).
Chart 3.3
LEVEL OF EDUCATION | 2011
Source: Banco de Portugal.
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The education levels are mirrored in the breakdown by career of the Bank’s employees: 6% are managerial
staff, 49% are senior professional staff, 6% are professional staff, 26% are technical-administrative staff
and the remaining 13% perform operational functions (Table 3.4).
Table 3.4
STAFF | BROKEN DOWN BY FUNCTION
Managerial staff 94
Senior professional staff 837
Professional staff 110
Technical-administrative staff 434
Head of support services 36
Specialist staff 25
General staff 124
Auxiliary staff 29
Total 1,689
Source: Banco de Portugal.
3.4.2. Compensation and benefi ts policy
The alignment of the Bank’s compensation and benefi ts policy with its current operational situation and
the country’s economic and fi nancial situation has been a key concern. In 2011 the Board of Directors of
Banco de Portugal therefore decided to adopt measures to contain the Bank’s operational costs, which
led to an average reduction of 5.6% in the actual compensation of the Bank’s staff and a reduction of
7% in staff costs.
The salary and staff cost containment measures were naturally bound by the legal framework governing
Banco de Portugal, namely the Statute of the European System of Central Banks and of the European
Central Bank, the Organic Law of Banco de Portugal, the Labour Code and the collective labour agreements
in force. In turn, these measures aimed to save costs, favouring a structural reduction in expenditure and
striving to minimise any negative effects on internal equity and recognition of merit.
The staff cost containment policy will continue in 2012. The Board of Directors decided to apply salary
containment measures resulting in an overall saving equivalent to that of the measures established in
the State Budget Law for the current year.
In 2011 developments in the Bank’s pension funds are also worth mentioning. Banco de Portugal
manages two pension funds through Sociedade Gestora dos Fundos de Pensões, S. A. (Pension Funds
Managing Company): the Defi ned Benefi t Pension Fund, a closed-end pension fund covering staff who
started working in the banking sector before March 2009, and the Defi ned Contribution Pension Fund,
a supplementary pension plan that is voluntary for staff who started working in the banking sector after
March 2009.
The management of the Defi ned Benefi t Pension Fund had two main goals: to preserve the benefi ts of
employees covered by the fund against the backdrop of the transfer of future old-age pension liabilities
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to social security38 and to maintain a high level of solvency in the fund. As at 31 December 2011 the
fund’s assets amounted to €1,255.1 million in euro area bonds (77.1%), real estate (13.3%), equities
(7.8%) and liquidity (1.8%). The overall funding level of the Defi ned Benefi t Pension Fund was 98.3%,
above the minimum level established in Notice of Banco de Portugal No 12/2001 (98.1%).
In turn, the management of the Defi ned Contribution Pension Fund focused on the main goal of promoting
the fund as the second pillar of protection for staff that started working in the banking sector after
March 2009. Against the background of high fi nancial market turmoil in 2011 and to mitigate credit
risk, the Bank decided to postpone the implementation of a life cycle approach in the fund’s management.
The investment policy therefore consisted of a single investment portfolio containing only euro area
short-term debt securities, which amounted to €5,077 million as at 31 December 2011. The Fund had
227 participants, which represented an increase of around 70% from 2010, as the majority of new staff
members opted to participate in this fund.
3.4.3. Human resource development policies
The human resource development activity is part of an integrated policy to manage the careers and
skills of the Bank’s staff.
New performance evaluation system
In 2011 a new system was implemented to strengthen staff performance evaluation. Support was provided
to users, in particular managerial staff, during the introduction of the new system, which includes a
planning and an intermediate assessment phase. The system was subject to some adjustments and
system improvements were identifi ed.
Professional training
The Bank continues to carry out a training needs diagnostic on an annual basis, thereby creating conditions
for greater personal, professional and cultural development of its staff. In 2011, 739 training courses were
held, of which 306 were internal and 283 and 150 were external (in Portugal and abroad respectively).
85.7% of the Bank’s staff had a total of 51,750 hours of training (an average of 30.6 hours of training
per employee) (Table 3.5).
Table 3.5
TRAINING
2007 2008 2009 2010 2011
Participants 1,411 1,395 1,528 1,598 1,447
Hours 55,657.5 64,397.5 48,414.5 66,223.0 51,750.0
Participation rate 83.6% 82.8% 89.2% 97.0% 85.7%
Source: Banco de Portugal.
38 In March 2009 the Defi ned Benefi t Pension Fund was closed to new staff, who are now covered by the general social security scheme (Decree Law No 54/2009 of 2 March 2009). From January 2011 the fund’s benefi ciaries (i.e. the Bank’s staff who started working in the banking sector before March 2009) are also covered by the general social security scheme concerning old-age pensions corresponding to years of service after January 2011 (Decree Law No 1 - A/2011 of 3 January 2011). The Fund therefore continues to cover old-age pension payments to these workers corresponding to years of service before January 2011, as well as disability and survivors benefi ts. The Defi ned Benefi t Pension Fund also covers the supplement intended to make up for the difference between benefi ts calculated under the general social security scheme and the benefi ts based on the applicable collective labour agreements and on internal regulations.
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In 2011 the Bank started exploratory conversations to implement a training plan on fi nancial regulation,
supervision and auditing in 2012, in association with a university. This initiative aims to strengthen the
technical expertise of the Bank’s current staff, while enlarging the pool of workers available for recruitment
by promoting specialised teaching in areas that are key for the Bank.
3.5. BUDGET AND BUILDING MANAGEMENT
In 2011 Banco de Portugal adopted several measures to save costs and improve budget procedures and
undertook maintenance and safety programmes for its facilities.
3.5.1. Budget management
At the end of 2010 the Bank started the Programa Especial de Efi ciência no Uso dos Recursos (Special
programme for effi cient use of resources), with the aim of promoting effi cient use of resources and
rational and sustained containment of the Bank’s costs. This programme made it possible:
• To reduce travel costs by using prices agreed in a joint Eurosystem procedure carried out by the
Eurosystem Procurement Coordination Offi ce (EPCO) and by choosing more economical air fares;
• To develop and start implementing a model both to centralise public procurement tender procedures
at Banco de Portugal and conclude contracts. In addition to the procurement of current goods and
services, the Bank centralised tender procedures for security activities and to a large extent banknote
issue and treasury activities. In 2011, 140 of the 236 procedures performed through the public
procurement electronic platform were managed under the new model;
• To reduce energy consumption by 2.6%;
• To adjust market data solutions to the real needs of the Bank’s business areas. The reduction of
real-time licences (already partially accomplished), and the ongoing implementation of solutions to
provide these services to a wider range of users, albeit with some time lag, signifi cantly reduce costs;
• To reduce the external production of editions, publications and visual material by rationalising the
number of copies and promoting the use of electronic editions.
The implementation of measures adopted under the Special programme for effi cient use of resources
and the salary containment measures referred to in Section 3.4 led to a signifi cant reduction in both
staff and goods and services costs in 2011. The Bank’s administrative and staff costs declined by 6 and
8% respectively compared to 2010.
In addition to several cost containment measures, which will be pursued and deepened in 2012, the
Bank has made a number of improvements to its budget procedures, in particular by:
• Strengthening the top-down approach in establishing and executing the budget, namely under the
Budget Monitoring Commission, created in 2011;
• Improving the cost-benefi t analysis of investment projects, in particular regarding information and
communication systems and technologies (see Section 3.3.);
• Defi ning a procedure of automatically earmarking the availability of funds at the start of acquisition
procedures;
• Improving its activity costing system, with the aim of improving information to managers.
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3.5.2. Building management and security
In 2011 Banco de Portugal focused on maintaining its buildings and promoting their functionality and
effi ciency.
Particular mention should be made of the works to remodel the Bank’s head offi ce and install the Money
Museum in the Church of S. Julião. In September 2006 the Comissariado para a Reabilitação da Baixa/
Chiado (Commission for the rehabilitation of Baixa/Chiado) proposed that the integrated fi nancial centre
located in Baixa/Chiado (which includes the Bank’s head offi ce building) be reinforced as an important
contribution to rehabilitate this area of Lisbon. This would keep the location of the fi nancial institutions’
decision-making centres in the area and create public areas, such as art exhibition rooms and other cultural
venues. Banco de Portugal expressed its willingness to house the future Money Museum in the Church
of S. Julião, as part of the work to remodel the head offi ce building. The buildings which make up the
block where the Bank’s head offi ce is situated are the result of the gradual integration of a set of eight
buildings and the Church of S. Julião (disused since 1939), which the Bank acquired from 1868 to 1933.
Although the exterior façade seems homogenous, various changes to the interior of the buildings (due
to the Bank’s evolving operational needs and the subsequent integration of the buildings) have resulted
in their structure gradually becoming more fragile and therefore in need of urgent renovation. The Bank
decided to restore the structure of the buildings as it was no longer possible to resort to temporary or
partial solutions. In 2011 work proceeded as planned and the date of completion is scheduled for the
end of the fi rst half of 2012.
In addition to the works on the head offi ce, the following were particularly important in 2011:
• A preliminary study was conducted on the master plan for Edifício Portugal;
• An authorisation was obtained from the City Hall to remodel the Bank’s Regional Delegation in
Funchal. Work began on the preparation of projects to execute architectural and specialist work;
• A project was prepared to extend the Valora printing works, which was approved by the City Hall
of Alenquer. The tender procedure for the contract is at its fi nal stages and the extension works will
be concluded by the end of the third quarter of 2012.
In addition, the Bank conducted preliminary studies, currently under review, to systematise its physical
security policy. Following a brief operational risk assessment, the Bank began a structural diagnostic of
Edifício Portugal to assess the state of repair of the building’s structure and determine its ability to respond
to extreme situations. In addition, several procedures were optimised to improve the performance of
security activities and provide greater risk control, specifi cally regarding the operation of security control
centres, automatic access control and alarm organisation and management.
In 2011 several environmental steps were taken in the Carregado Complex to comply with applicable
legislation on waste collection and treatment. The Carregado Complex obtained a certifi cation of indus-
trial activity in waste treatment. An energy audit, a study on future guidelines and an environmental
liability audit were also conducted.
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4. COMMUNICATION AND SUPPLY OF SERVICES TO THE
COMMUNITY
Banco de Portugal fully supports the development of a communication policy conducive to greater
proximity, transparency, recognition and prestige at national and international level. At the same time, it
seeks to improve the quality of services rendered to the community, in particular regarding the production
of economic and statistical information. As in other areas of activity, the Bank is geared towards greater
resource effi ciency, social responsibility and environmental sustainability. The following sections present
the main actions carried out in 2011 in the pursuance of these goals.
4.1. COMMUNICATION MODEL BASED ON TRANSPARENCY AND ACCURACY
4.1.1. Communication with the public
With a view to ensuring that only accurate and accessible information is disclosed, in 2011 Banco de
Portugal focused on using its websites − the institutional website and the Bank Customer Website – and
other electronic channels, while reducing hard copies of publications and printed materials. The Bank
also invested in the simplifi cation and systematisation of the layout and design used in its publications.
The institutional website and the Bank Customer Website were restructured, with new areas being added
to the former, e.g. on the Economic and Financial Assistance Programme (EFAP). The Bank’s general
e-mail address continued to be widely used to communicate with fi nancial services users, either to ask
for information, to lodge complaints or merely to submit opinions, suggestions or criticisms.
Developments in the institutional website’s contents and structure have, over the past few years, made
access to available areas much more widespread. In 2011 the number of visits to the institutional website
grew by 15%, an increase that was particularly considerable in statistical, institutional and economic
research areas (Table 4.1).
Table 4.1 Daily average
VISITS TO THE INSTITUTIONAL WEBSITE
2009 2010 2011
Total number of visits to webpages 24,425 32,317 37,217
Visits to webpages by area
Statistics 6,587 10,021 14,343
The Bank and the Eurosystem 2,815 5,634 7,248
Economic research 1,799 2,160 2,720
Supervision 1,673 2,184 1,427
Publications and interventions 904 1,003 1,118
Services to the public 1,180 1,121 1,092
Monetary policy 1,658 1,263 964
Banknotes and coins 947 911 850
Legislation and regulations 962 1591 669
Payment systems 452 413 408
Source: Banco de Portugal.
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The policy of promoting greater transparency and interaction with the community can be gauged, for
instance, from developments in the number of press releases and public interventions by Banco de Portugal
in several national and international forums, which are also published on the institutional website. All of
these indicators have tended to increase and, compared with 2010, the number of interventions published
on the website grew by around 25% and the number of press releases by approximately 40% (Chart 4.1).
Chart 4.1
NUMBER OF PRESS RELEASES AND INTERVENTIONS
Source: Banco de Portugal.
There were also major developments in the Bank Customer Website in 2011. Through this website, Banco
de Portugal raises bank customers’ awareness and provides information on fi nancial matters with the
aim of improving the quality of their search for retail banking products and services and, consequently,
stepping up measures in the fi eld of banking conduct supervision (see Section 1.4). For instance, the
Bank publishes information on the Website on quarterly cap rates for consumer credit and monthly
averages of the Euribor rates used as the benchmark in mortgage credit agreements with a fl oating rate.
On the Bank Customer Website, Banco de Portugal offers a range of services to the public. These include
forms for complaints against credit institutions, requests for information on the Central Credit Register
and the List of Cheque Defaulters and requests to locate fi nancial assets of deceased account holders.
In 2011 the Bank Customer Website garnered an average of 4,427 page views per day, which accounts
for a 13% increase from 2010. The most viewed contents throughout the year were related to banking
products, along with services provided by Banco de Portugal (each accounting for 25% of the total)
and publications (15%).
With regard to banking products, the most frequently visited area was bank deposits (accounting for
33% of views), particularly with the purpose of consulting the interest rate simulator and information
on types of deposit, and the opening, holding and operating of a deposit account.
In relation to services provided by Banco de Portugal through the Bank Customer Website, the most
frequently visited areas in 2011 were complaints (with 55% of views), followed by Central Credit Register
(27%) and the prohibition of the use of cheques (12%). The share of views associated with requests to
locate accounts of deceased holders was 8%. Chart 4.2 illustrates developments in these services over
2011 and compared with the previous year.
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Chart 4.2
SERVICES PROVIDED BY BANCO DE PORTUGAL THROUGH THE BANK CUSTOMER WEBSITE
Source: Banco de Portugal.
Through the Bank Customer Website, 2,364 information requests were sent to Banco de Portugal, i.e. 2%
less than in 2010. Banco de Portugal analyses these requests, as well as those received via other means
(by post, e-mail, in person or over the phone). When replying to requests, the Bank may supply individual
explanations or direct bank customers towards the relevant areas within the Bank Customer Website.
In 2011 the Bank’s general e-mail address ([email protected]) received 5,433 valid messages, mostly
regarding requests for information on topics addressed on the Bank Customer Website as well as
complaints. Through the Website, users mostly requested explanations on how to obtain information
included in the Central Credit Register and, to a much lesser extent, in the List of Cheque Defaulters. As
regards the institutional website, spontaneous applications to Banco de Portugal were highly relevant,
followed by requests for information on banknotes and coins and on statistics and publications.
Turning to the provision of information to credit customers on the content of personal records in the
Central Credit Register, the Bank’s offi ces open to the public (head offi ce, Oporto branch, regional dele-
gations and agencies) had served, as at the end of 2011, 113,000 credit customers (455, on average,
per day), accounting for a 15% year-on-year drop from 2010 (Chart 4.3).
Chart 4.3
DEVELOPMENTS IN THE NUMBER OF CUSTOMERS OF CENTRAL CREDIT REGISTER | FRONT OFFICE SERVICES
Source: Banco de Portugal.
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In the fi rst quarter of the year, an automatic telephone answering system for the Central Credit Register
went live, improving effi ciency in communicating the conditions for credit customers’ access to their
personal records in the Register.
With regard to the prohibition of the use of cheques, in 2011 the Bank’s front offi ce services provided
information to 22,128 users of banking services − 9,214 in the head offi ce and 12,914 in regional
delegations and agencies. Replies were sent to 943 requests for clarifi cation made through the Bank
Customer Website or by post.
In this context, Banco de Portugal is developing new online front desk solutions to allow access to
personal records in the Central Credit Register and the List of Cheque Defaulters. This solution is due to
go live at the beginning of the second quarter of 2012.
The Banco de Portugal Booklet series, published on both websites, was updated on several occasions
in 2011: Booklet No 5, on the Central Credit Register, due to the changes introduced by the new
information system supporting the Register; Booklet No 8, on euro banknotes and coins, in order to
include information on coins minted by the countries that have most recently adopted the euro (Slovenia,
Cyprus, Malta, Slovakia and Estonia) and updated information on cash recycling and legislation/regula-
tions on cash. Booklet No 10, on point-of-sale terminals and automated teller machines, was published
for the fi rst time.
Still in the context of communication with society at large, Banco de Portugal undertook a number of
initiatives in 2011 to raise awareness about the Single Euro Payments Area (SEPA) among users and the
main stakeholders on the supply side (credit institutions), more specifi cally:
• The regular release of the SEPA.pt newsletter, which includes summarised information on activities
under the SEPA migration process, both in Portugal and the euro area;
• The publication of the leafl et SEPA: o que é (“SEPA: what is it?”), targeted towards users of retail
payment services and detailing the advantages of SEPA, the covered payment instruments and how
it affects the daily life of bank customers;
• The publication of a video on SEPA39, produced by the ECB.
Strengthened communication with the public was also evident in the international relations fi eld, with
the establishment of an information area on the Economic and Financial Assistance Programme (EFAP)40.
This area was made available on the Bank’s institutional website, allowing consultation of the main
documents on the Programme, the associated press releases (issued by the Bank and other entities) as
well as documentation produced by the Bank. This information is regularly updated in Portuguese and
in English.
Banco de Portugal continued to contribute to the external communication of the ESCB/Eurosystem,
namely by taking part in the production of publications and the preparation and release of the Portuguese
version of the main reports and contents, which are published on its website together with the English
version. As part of its external communication activities, the ECB has aimed at explaining economic and
fi nancial developments, the consequences of the global fi nancial crisis and the sovereign debt crisis in
the euro area and the measures taken in response to such developments, where Banco de Portugal
actively participated.
39 Available at http://www.ecb.europa.eu/paym/sepa/html/index.en.html.40 http://www.bportugal.pt/en-US/OBancoeoEurosistema/ProgramaApoioEconomicoFinanceiro/Pages/default.aspx
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Public disclosure is also a pivotal part of the Bank’s activity in international cooperation and is essentially
twofold: on the one hand, the Bank presents the wide range of initiatives it promotes or in which it
participates; on the other hand, it provides a service to the public, by disseminating diverse information
on issues related to developing/emerging countries.
The Lisbon Meeting, a highly important event in this context, is deemed particularly newsworthy by the
media. This Meeting is attended by high-level representatives from central banks of Portuguese-speaking
countries and, in the corresponding open session, by Portuguese and international guests working in
the economic and fi nancial fi eld.
The new format of the Lisbon Meeting, which was introduced in 2010 and consolidated in 2011 (the
21st meeting), aimed at strengthening the information and dissemination component of the open session
and comprised three parts: fi rst, promoting a broader participation, at the highest level, of participating
central banks and fostering interaction with guests; second, selecting more specifi c topics and poten-
tially attracting a wider audience, in the economic and fi nancial fi eld − as was the case, in 2011, of
the presentation by the President of Brazil’s central bank on the G20 agenda; third, reformulating the
documents made available at the Meeting.
Supporting materials for meetings and seminars cover various economic and fi nancial aspects and refer
mainly to Portuguese-speaking countries. In particular, two documents were prepared, focusing on the
monitoring of developing and emerging economies: (i) the annual report on developments in African
Portuguese-speaking countries and East Timor; and, (ii) a multimedia presentation on the macroeconomic
environment in Portuguese-speaking countries – reformulated in 2011, after being launched in the
previous year.
The joint website of the central banks of Portuguese-speaking countries, which was established in 2010, is
a particularly appropriate way to present their international cooperation activities. This website functions,
in part, as a working platform limited to those institutions, but it is also a vehicle for the dissemination
of a signifi cant series of documents, news and information. In 2011 Banco de Portugal continued to be
deeply involved in the organisation and operation of this website.
4.1.2. Interaction with the fi nancial community
With regard to the operational activity involving fi nancial institutions, Banco de Portugal has given
priority to the use of BPnet − the Bank’s extranet for the fi nancial system. At the end of 2011, BPnet
provided 79 distinct services, related to 12 business areas of the Bank, with 4,400 registered users from
332 institutions and an average of 2,392 visits/working day (Table 4.2).
Table 4.2
DEVELOPMENTS IN THE BPNET SERVICES
2008 2009 2010 2011
Available services 56 57 75 79
Number of users 3,788 4,247 4,481 4,400
Participating fi nancial institutions 363 348 339 332
Number of times services were accessed 333,822 615,525 707,570 602,705
Help desk 6,420 8,992 6,847 5,849
Source: Banco de Portugal.
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The number of services provided by BPnet is growing, mostly relating to prudential and banking conduct
supervision, issue and treasury (under which, in 2011, the banking system accounts database was created),
and statistics. Regarding the latter, there was a sizeable increase in the number of views of the Central
Credit Register, which drove the developments observed since 2009.
Indeed, the Central Credit Register continued to manage the processing, quality control, aggregation
and dissemination of information relating to credit stocks that are reported on a monthly basis by
participating institutions.41 The Central Credit Register has provided a crucial service as regards credit risk
management by the fi nancial system and the conduct of various tasks entrusted to Banco de Portugal:
statistical analysis, supervision, fi nancial stability review and monetary policy.
In 2011 there were around 6.4 million consultations from participating institutions, as part of their lending
risk assessment, representing a 17.5% drop from 2010. The relative weight of the online channel in
terms of consultations continued to increase, corresponding to around 48% of total views. Chart 4.4
illustrates developments in consultations of the Central Credit Register by participating institutions over
the past fi ve years.
Chart 4.4
CONSULTATIONS OF THE CENTRAL CREDIT REGISTER BY PARTICIPATING INSTITUTIONS
Source: Banco de Portugal.
With regard to best-practice benchmarks in risk management, control and governance among the
fi nancial community, the main developments were as follows:
• Banco de Portugal has reinforced the promotion and dissemination of good governance practices
among the Portuguese fi nancial community, more specifi cally by organising, in October 2011, the
Jornadas de Auditoria e Gestão (Audit and Management Conference). This event targeted senior
executives exercising control functions in fi nancial institutions, on the subject of ‘Basel III and the
new challenges for supervisors, risk managers and auditors’;
• Banco de Portugal published a further internal audit booklet (Cadernos de Auditoria Interna) and
publicised it to the fi nancial community.
41 As of 2011 ‘participating entities’ also include entities that, albeit not part of the fi nancial sector, purchased credits originally granted by this sector and, as such, this information continues to be covered by the Central Credit Register.
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4.1.3. Cooperation with Portuguese and international entities
In 2011 Banco de Portugal continued to interact with several Portuguese bodies (such as the Ministries
of Finance, Foreign Affairs, Solidarity and Social Security, Justice, Economy and Employment, as well
as Statistics Portugal) and international bodies (such as the ECB and other EU institutions and entities,
the IMF, the Organisation for Economic Co-operation and Development, Eurostat and the Bank for
International Settlements).
At national level, Banco de Portugal actively participated in the work related to EFAP, particularly in
articulation with the Ministry of Finance, as well as in the compilation of general government statistics.
In this context, the Bank helped prepare the March and September 2011 reporting carried out under the
excessive defi cit procedure (EDP), under the Institutional Cooperation Agreement established in 200642.
Still regarding general government accounts, Banco de Portugal actively participated in the dialogue
visits carried out by Eurostat in 2011, which took place in Lisbon.
Banco de Portugal, through the National Counterfeit Centre43, has fostered training and information
initiatives on euro banknotes and coins, targeted at both professional cash handlers and the general
public. It is to be expected that this will contribute to contain banknote and coin counterfeits and
associated fi nancial losses and, thereby strengthening the credibility of euro banknotes and coins as
payment instruments. In this context, a protocol was signed with ACAPO (the Portuguese association for
the blind and partially sighted), with a view to preparing their instructors to explain the specifi c features
of euro banknotes to people with impaired vision.
In its role of handling of its tasks related to administrative offence proceedings, defending the banking
perimeter and combating money laundering and the fi nancing of terrorism, Banco de Portugal cooperates
with judicial authorities in investigating common matters, by providing technical advice. Moreover, the
Bank has organised and participated in various training initiatives, namely under cooperation protocols
signed with the Prosecutor General’s Offi ce and the Criminal Police.
In 2011 Banco de Portugal also continued to promote the exchange of information with the scientifi c
community in Portugal and abroad, through the organisation of conferences, seminars and training
courses. In the year as a whole, the Bank actively participated in 117 seminars and conferences, of which
89 were related to international forums44.
Turning to economic research, in the course of the year there were 23 internal and external seminars and
a short-term course at Banco de Portugal. Two conferences were held in 2011: ‘Financial intermediation’
in July and ‘Wages, job turnover and education’ in June, with the presence of national and international
leading economists.
As regards statistics, Banco de Portugal implemented various training activities with a view to fostering
statistical and fi nancial literacy. In the fi eld of monetary and fi nancial statistics, the Bank made presen-
tations in the Sectoral Economic Standing Section of the Conselho Superior de Estatística (Statistical
Council) on credit statistics compiled on the basis of the Central Credit Register and the XIX Congresso
da Sociedade Portuguesa de Estatística (the 19th Congress of the Portuguese Statistical Society), on the
compilation of statistics on securitisation. Turning to the Central Balance-Sheet Database, particularly
noteworthy was the First Conference of the Central Balance-Sheet Database, which took place in Lisbon in
early January and was preceded by a session in Oporto at the end of 2010. The Bank also organised several
presentations on the Central Balance-Sheet Database, at four universities and within four different forums,
as well as a special session on ‘Banco de Portugal statistics’ during the ‘XVIII Journeys of Classifi cation and
Data Analysis’, which took place in April at the University of Trás-os-Montes and Alto Douro.
42 This Agreement involves the National Accounts Department of Statistics Portugal (INE), the Directorate-General for the Budget and the Statistics Department of Banco de Portugal.
43 E-mail address: [email protected] Table 2 in Annex A.2.1 includes a list of all presentations by Banco de Portugal in 2011.
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4.2. OPTIMISATION OF INFORMATION PRODUCED AND DISSEMINATED
4.2.1. Economic information
In 2011 Banco de Portugal released its regular publications, in accordance with the planned timetable,
and continued to publish research studies in its Working Paper series.
In the Annual Report, the Bank presented the analysis of the Portuguese economy for 2010, covering
supply (which includes employment and unemployment), demand, balance of payments, prices, public
fi nances and international environment, as well the ECB monetary policy and the monetary and fi nancial
conditions of the Portuguese economy.
In the course of the year, two issues of the Financial Stability Report (May and November) were released,
featuring an analysis of macroeconomic and fi nancial risks and the fi nancial situation of households
and non-fi nancial corporations as well as the banking system. More specifi cally, in 2011 the Financial
Stability Report included macro-prudential analysis articles focusing on the Portuguese and euro-area
economies, namely the lending behaviour of banks, modelling the evolution of household defaults, the
role of debt in the extinction of fi rms, the defi nition of a systemic risk indicator based on contingent
claim analysis, access to banking credit when banks are shareholders of fi rms and the estimation of the
impact of bank mergers in Portugal.
The analysis of the Portuguese economy was incorporated in the course of the year in the various issues
of the Economic Bulletin of Banco de Portugal (winter, spring, summer and autumn). As in previous years,
the Economic Bulletin, in addition to articles of a technical natural on several topics, included texts on
the economic policy and situation, incorporating estimates and forecasts for the Portuguese economy
(in 2011, for the fi rst time, this was the case in all four issues of the Economic Bulletin). In this specifi c
area of the Portuguese economy, the Bank continues to develop and improve its macroeconometric
forecasting and modelling tools, particularly through the use of dynamic general equilibrium models.
Applied studies on the Portuguese and international economies were published in the Economic Bulletin
covering various topics, such as the link between fi nancial stability and monetary policy, macro-prudential
rules and stabilisation policy, fi scal devaluation, fi scal adjustment policies and wage differentials between
the public and private sectors, and the sectoral credit risk in the euro area. Several studies were also
published on the microeconomic behaviour of Portuguese fi rms, in terms of minimum wages, productivity
and capital intensity and integration of immigrants in the Portuguese labour market.
The Monthly Economic Indicators present major statistical indicators released during the month and also
the coincident indicators of economic activity and private consumption computed by Banco de Portugal.
In addition, the results of the quarterly Bank Lending Survey were published by the Bank.
In 2011 Banco de Portugal also continued to release research studies in its Working Paper series, in a
total of 31 articles. Some of the research produced by economists working at the Economic Research
Department was published in international scientifi c journals45.
The importance of these economic publications to the public can be gauged from the number of references
made in the media. Indeed, up to the end of the third quarter of 2011, around 1,400 references46, were
made to the publications, by around 90 mass media channels in each quarter (versus approximately
1,500 references by 80 mass media channels over the same period in 2010).
45 Namely, Journal of Monetary Economics, Economics Letters, Empirical Economics, Review of World Economics, Portuguese Economic Journal, Economics Bulletin, Empirical Economics, Journal of Macroeconomics, Managerial and Decision Economics, Economic Modelling, Journal of Economic Studies, European Planning Studies, Applied Economic Letters, Tourism Economics.
46 In the national press, on the Internet, TV and radio.
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4.2.2. Statistical information
In 2011 Banco de Portugal reinforced the dissemination of statistical information and further improved
its use through the production of new information, shorter time frames for disseminating information
and a better cooperation with reporting entities, namely by adopting a more proactive approach. With
regard to new statistical information, special mention should be made of a new chapter, introduced in the
Statistical Bulletin, called “Main indicators”. This chapter comprises 19 sections and is targeted towards
improved statistical reporting and the promotion of statistical literacy, making international comparison
a priority (data for Portugal, the euro area and the United States are presented, covering various fi elds).
For instance, as an example of a more timely release of information, quarterly data on the international
investment position are now released one month earlier.
The number of statistical series published on a regular basis by Banco de Portugal in the monthly Statistical
Bulletin increased further and, in 2011, reached 7,078 series (Chart 4.5).
Chart 4.5
NUMBER OF STATISTICAL SERIES PUBLISHED IN THE STATISTICAL BULLETIN
Source: Banco de Portugal.
In 2011 two supplements to the Statistical Bulletin were published: 1 | 2011 – Papers presented by the
Statistics Department in national and international fora, between 2009 and 2011; and, 2 | 2011 – Papers
presented by Banco de Portugal representatives at the 58th Session of the World Statistics Congress of
the International Statistical Institute. The following Central Balance-Sheet Database studies were also
released: Sectoral analysis of non-fi nancial corporations in Portugal; Sectoral analysis of manufacture
of food products; Sectoral analysis of accommodation and food service activities; New enterprise and
sector tables – Adapting the accounting normalisation system.
Within the scope of the BPstat | Statistics online system, Banco de Portugal continued to update the
statistical information (three times a day: 11 a.m., 12.30 p.m. and 2.30 p.m.), in line with the timetable
released at the beginning of the year. Existing metadata and statistical areas were expanded and new
statistical areas were introduced: new details on fi nancial national accounts, the impact of funds received
under EFAP on Banco de Portugal’s balance sheet, general government gross debt on a quarterly basis
and new details on regional and local government debt, as well as new Sector Tables (annual aggregate
information on non-fi nancial corporations included in the Central Balance-Sheet Database of Banco de
Portugal) in the multidimensional component of BPstat47.
47 Despite the extension of the delivery limit for the Informação Empresarial Simplifi cada – IES (Simplifi ed Corporate Information), around 5,000 sector tables for 2010 were produced and published in 2011, on the basis of data received from over 340,000 fi rms.
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With regard to information on payment systems and instruments, and with a view to better monitoring
of the migration of national payment instruments to the SEPA format, in January 2011 Banco de Portugal
incorporated in BPstat comprehensive information on transactions in that format. Therefore, SEPA
transactions made by national credit institutions through international clearing systems (e.g. via EBA
Clearing) were added to SEPA transactions processed through SICOI.
The number of users registered with BPstat who have subscribed to the news alert system continued
to increase in 2011, standing at 14,024 on 31 December (accounting for an annual increase of 35%
from 2010).
Chart 4.6
NUMBER OF USERS REGISTERED WITH BPSTAT AND SUBSCRIPTIONS | AS AT 31 DECEMBER 2011
Source: Banco de Portugal.
AIn addition to information on payment systems and instruments incorporated on a monthly basis in the
Statistical Bulletin and BPstat, Banco de Portugal publishes an Annual Report on Payment Systems. Infor-
mation included in this report was expanded in 2011 to include an overview of the Portuguese payment
system, data on interbank clearing and settlement systems in Portugal and payment instruments in the
clearing and settlement systems. This is a relevant tool for both the Portuguese banking community, as
it can support their management and decision-making processes, and society at large, as a way to obtain
more in-depth knowledge of standards for the use of payment instruments48.
Also in terms of the institutional website of Banco de Portugal, special mention should be made of the
update of the Economic indicators and Economic forecasts, as soon as input information is available, which
allows for a regular monitoring of a selected series of statistical indicators for Portugal and the euro area.
A further key feature in this fi eld is the establishment of an area reserved for fi rms on the Bank’s website.
This area will, among other things, make it easier to comply with statistical reporting requirements and
promote the use of statistics and recognition of their worth. Ideally, it will become the communication
channel of choice between Banco de Portugal and fi rms, particularly non-fi nancial corporations, given
that the current production of statistics by Banco de Portugal includes a very sizeable number of fi rms.
Indeed, in 2011 the universe of fi rms covered by the Central Balance-Sheet Database was over 340,000
fi rms (in terms of annual data) and included, on average, 1,700 common fi rms in two consecutive years
(in terms of quarterly data).
48 Data compiled by Banco de Portugal are forwarded on an annual basis to the ECB, for subsequent incorporation in the Statistical Data Warehouse (available at http://sdw.ecb.europa.eu/)
88
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1
In 2011 statistical information was reported to international bodies in strict compliance with the esta-
blished deadlines and across multiple information fi elds. For the fi rst time, data on fi nancial national
accounts were reported to the OECD on a quarterly basis (survey on assets of institutional investors and
assets/liabilities of households) and the Eurostat and the ECB received information on pension liabilities
of all institutional sectors within the economy, including general government. In turn, Statistics Portugal
assumed the Bank’s reporting obligations regarding two sets of data and, consequently, the number of
reported series dropped slightly.
Table 4.3
REPORTING TO INTERNATIONAL BODIES
2009 % 2010 % 2011 %
Total reporting 1,080 arc: 20% 1 176 arc: 9% 1,188 arc: 1%
deviation* = 0 563 52% 915 78% 897 75.5%
deviation* < 0 517 48% 261 22% 291 24.5%
deviation* > 0 0 0% 0 0% 0 0%
Total series 424,384 arc: -21% 476,624 arc: 12% 450,369 arc: -6%
* Deviation from the date set in the reporting schedules. arc: annual rate of change
Source: Banco de Portugal.
4.3. PROMOTING SOCIAL RESPONSIBILITY AND ENVIRONMENTAL SUSTAINABILITY
Cultural services, such as the library and the permanent exhibitions at the Museum of Banco de Portugal,
are particularly relevant as a part of enhanced communication and provision of services to the community,
as well as the development of a structured policy of social responsibility.
In 2011 the Bank’s library, which specialises in economics, fi nance and law, continued to offer a
consultation service to users, placing at their disposal its collection of documents and electronic publications,
either in the reading room or on the Bank’s website. The electronic version of the library’s newsletter
was also a popular way to disseminate information seen as useful to users. In the year under review, the
Bank conducted information campaigns with college students and researchers, with the aim of raising
awareness about the importance of its historical archives.
As part of the research project on the history of Banco de Portugal, a publication entitled Uma Elite
Financeira: Os Corpos Sociais do Banco de Portugal 1846-1914 (A fi nancial elite: the governing bodies
of Banco de Portugal) was written by Jaime Reis and released by the Bank.
In December 2011 the Bank also allowed its premises to be used for the launch of História Económica
de Portugal - de 1143 a 2010 (Economic History of Portugal - from 1143 to 2010), by Leonor Costa
Freira, Susana Münch Miranda and Pedro Lains. This book was presented by José da Silva Lopes, former
Governor of Banco de Portugal, and historian Joaquim Romero de Magalhães.
The Bank’s historical archive continued to support external researchers, particularly in the fi eld of
Portuguese banking and fi nancial history, by facilitating consultations to its collections.
89
Com
mun
icat
ion
and
supp
ly o
f se
rvic
es t
o th
e co
mm
unity
4
Exhibitions housed at the Museum of Banco de Portugal welcomed nearly 7,000 visitors in 2011: the
permanent exhibition in Lisbon, focusing on the history of money in the western Iberian Peninsula, was
visited by more than 4,000 people in 2011, mainly school groups; the exhibition Memória e Intimismo
(Memory and Intimism), in Oporto, attracted around 2,000 visitors, and the exhibition Dinheiro nos
Açores (Money in the Azores), in Ponta Delgada, approximately 400 visitors.
In the course of the year, reconstruction work continued to be carried out to house the future Money
Museum in the former Church of São Julião, as part of both the renewal of the head offi ce building of
Banco de Portugal and a project to revitalise the Baixa/Chiado area.
During the course of the reconstruction work, the scientifi c community, namely from universities and
professional associations, had an opportunity to visit the head offi ce building, covering areas such as
archaeology, restoration, architecture and engineering.
Typically, Banco de Portugal also welcomes non-technical visits, from secondary school, college and
university students. In 2011 the Bank gave a presentation to a total of 75 students (broken down into
several groups from secondary schools) on Banco de Portugal’s mission, objectives and tasks.
In 2011 Banco de Portugal continued to support initiatives of particular interest to the Portuguese economy
and key social and cultural organisations. As in 2010, an initiative was developed during the Christmas
season together with the institution ENTREAJUDA, under the slogan Pessoas Solidárias – Invista nesta
Ideia (Solidary people – Invest in this idea), which consisted in raising funds among Banco de Portugal
staff, which were subsequently channelled into assistance packages delivered to families in need that
are supported by charities.
The Museum of Banco de Portugal hosted a painting exhibition called Inside Earth, by Eduardo Pinto
Coelho, which was promoted by the Portuguese association supporting women with breast cancer
(Associação Portuguesa de Apoio à Mulher com Cancro de Mama), to commemorate the centenary of
the International Women’s Year. All proceeds from the sale of artwork in the exhibition benefi ted that
non-profi t private organisation.
A new project, called Banco de Portugal Voluntário (Banco de Portugal volunteers), was also made
available to all active and retired staff, with the main purpose of providing volunteering opportunities,
preferably with the local community.
ANNEXES TO CHAPTER 2
A.2.1. ECONOMIC RESEARCH AND ADVICE
International institutional representation of Banco de Portugal in 2011
Presentations at seminars and conferences
A.2.6. CURRENCY ISSUANCE
Banknotes
Coins
A.2.1. ECONOMIC RESEARCH AND CONSULTANCY
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Table 1
INTERNATIONAL INSTITUTIONAL REPRESENTATION OF BANCO DE PORTUGAL IN 2011
Sco
pe
Str
uct
ure
Committee/Working group
Main activities
Str
uct
ura
l u
nit
Nu
mb
er
of
face
-to
-face
m
eeti
ng
s
Nu
mb
er
of
tele
con
fere
nce
s Memo: sub-structures
Nu
mb
er
Nu
mb
er
of
face
-to
-face
m
eeti
ng
s
Nu
mb
er
of
tele
con
fe-
ren
ces
Eu
rosy
stem
/ ESC
B European
Central Bank
(ECB)
Governing Council Conduct of monetary policy, including decisions on interest
rates and non-standard measures, against a background of
high uncertainty and tensions in fi nancial and sovereign debt
markets. Adoption of several guidelines and decisions needed
to carry out the remaining statutory tasks entrusted to the
Eurosystem.
GO
V 22 1 2
General Council Analysis of the EU economic, monetary and fi nancial situation;
approval of the annual public fi nance report, functioning of
the Exchange Rate Mechanism (ERM II); and preparation of
international forum meetings.
GO
V 4
SEPA High Level Group
/SEPA CouncilDiscussion of main issues regarding the deepening of SEPA:
European regulation, innovation, security, communication
and governance.
AD
M 2
High Level Group
on SWIFT and CLS
Oversight Issues (HLG)
Oversight of recent CLS and SWIFT developments.
AD
M/
DPG 2
Organisational Analysis
Working Group (OWG)Conclusion of the Eurosystem Inventory Functions update;
review of the report Fact-fi nding on Eurosystem Collaboration.
As EPCO Steering Committee: assessment of the budget
proposal and procurement plan for 2012; approval of the annual
activity report. Monitoring of Operational Risk Management
(ORM) and Business Continuity Management (BCM).D
RH 5 1 4
– Eurosystem Procure-
ment Coordination
Offi ce (EPCO)
Approval of 13 documents on the exchange of best practice
(which are to be part of the Eurosystem vademecum on
procurement best practice), as well as of a common tender
document within the cost methodology framework.
DSA 6 8 5
International Relations
Committee (IRC)Analysis of global economic and fi nancial developments,
in particular regarding (potential) EU candidate countries;
international role of the euro; functioning of the Exchange
Rate Mechanism (ERM II); monitoring of and contribution to
the preparation of Eurosystem/ESCB/ECB and EU positions
on main G20 and IMF issues, in particular the international
monetary system architecture; exchange of information on NCB
cooperation activities in regions bordering the EU.
AD
M/D
RI
5 5 3 4 1
– High-level Seminar
of Central Banks in
the East Asia-Pacifi c
Region and the
Eurosystem
In addition to addressing cooperation between the two regions,
debates focused on a number of challenges to central banking
in the aftermath of the fi nancial crisis, in particular global
infl ationary pressures, capital fl ow volatility and leverage cycles.
AD
M 1
– Joint Eurosystem/
Central Bank of
Russia Seminar
Against the backdrop of a strengthened dialogue between the
Eurosystem and the Central Bank of Russia, working sessions
mainly addressed recent developments in the world economy
and the new supervisory architecture in the EU and Russia,
as well as specifi c aspects of the conduct of monetary policy.
AD
M/D
RI
1
Eurosystem IT Steering
Committee (EISC)IT governance within the Eurosystem/ESCB: defi nition of
operational models and rules, analysis of the IT projects
and systems (ongoing or under development); advice to the
Governing Council of the ECB.
CO
N 5 9
Monetary Policy
Committee (MPC)Assessment of the implications of the euro area sovereign
debt crisis, including the adoption of non-standard monetary
policy measures. Preparation of Eurosystem macroeconomic
projections and monitoring of EU public fi nances. Analysis
of the heterogeneity of monetary and fi nancial conditions in
the euro area.
DEE 10 5 7 23
Market Operations
Committee (MOC)Monitoring of the fi nancial crisis developments, in particular
on the sovereign debt crisis; advice on the implementation
and monitoring of non-standard monetary policy measures;
and monitoring of the EU/IMF programmes implementation
in Greece, Ireland and Portugal.
DM
R 6 203 3 12 18
94
cont. Table 1
INTERNATIONAL INSTITUTIONAL REPRESENTATION OF BANCO DE PORTUGAL IN 2011Sco
pe
Str
uct
ure
Committee/Working group
Main activities
Str
uct
ura
l u
nit
Nu
mb
er
of
face
-to
-face
m
eeti
ng
s
Nu
mb
er
of
tele
con
fere
nce
s Memo: sub-structures
Nu
mb
er
Nu
mb
er
of
face
-to
-face
m
eeti
ng
s
Nu
mb
er
of
tele
con
fe-
ren
ces
BA
NC
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TEM
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201
1 Banknote Committee
(BANCO)
Monitoring of the developments in the second series of
euro banknotes project (ES2); analysis of the strategy to be
followed by the Eurosystem up to 2020 regarding cash, and
other activities related to euro banknote production, issuance
and counterfeiting.
DET 8 14 62
Payment and
Settlement Systems
Committee (PSSC)
Monitoring of TARGET2 developments, specifically
regarding adaptations for T2S go-live; contribution to SEPA
implementation, specifi cally in view of the drafting of the
respective European regulation; participation in the oversight
of payment systems and instruments at ESCB level.
DPG 8 13 18 73 22
Statistics Committee
(STC)
Monitoring of ongoing projects in multiple statistical domains,
among others: statistics on insurance corporations and pension
funds; securities portfolio statistics; and RIAD (Registers for
Institutions and Assets Database). Monitoring of developments
to include new statistical requirements (e.g. ESA 2010) in the
legal acts.
DD
E 4 13 36 4
Budget Committee
(BUCOM)
Assistance to the Governing Council of the ECB in the
assessment of the ECB’s budget: execution of the 2010 budget,
intermediate execution of the 2011 budget and proposal for
the 2012 budget.
DC
C 4
Eurosystem/ESCB
Communications
Committee (ECCO)
Activities regarding Eurosystem communication policy,
instruments and platforms; monitoring of issues covered by
the media which are relevant to the ESCB NCBs; monitoring of
public awareness of the Eurosystem and the euro; development
of educational and information materials; communication
initiatives on the 10th anniversary of the euro and on euro
banknotes.
DRI/ G
AB 3 2 5 12 2
Financial Stability
Committee (FSC)
Assistance to the ECB’s decision-making bodies in the
performance of their tasks relating to the stability of the
fi nancial system and prudential supervision of credit institutions,
specifi cally the analysis of Financial Stability Review reports;
discussion of issues on crisis regulation, supervision and
management.
DEE/ D
SP 3 3 6 3
Accounting and
Monetary Income
Committee (AMICO)
Advice to the Governing Council of the ECB on accounting
and the allocation of monetary income; further accounting
harmonisation among Eurosystem NCBs; analysis of the
accounting treatment of new operations, in particular regarding
the sovereign debt crisis and non-standard monetary policy
operations.
DC
C 4 1 2 5
Legal Committee
(LEGCO)
Monitoring of legal issues within the Eurosystem, in particular
on the sovereign debt crisis and the Target2-Securities project. DJU 11 4
Information Technology
Committee (ITC)
Monitoring of activities related to the development of projects
within the ESCB, in particular in Shared Services. Defi nition
of a cooperation framework of ITC substructures in service
management and defi nition of roles and responsibilities in
articulation with service providers and the EISC. Strengthening
articulation with business committees, as well as COMCO (e.g.
to make the framework underlying the POCP (offi cial plan of
public accounting) and the methodologies established by this
committee compatible).
DO
I
8 5 23 5
Internal Auditors
Committee (IAC)
Planning and conducting of internal audits to joint systems and
processes at the ESCB/Eurosystem level to ensure effi cient risk
management, control and governance processes.
DA
U 5 1 6 4 17
Committee on Cost
Methodology (COMCO)
Contribution to work on the Eurosystem cost methodology, in
particular regarding projects and services of the Eurosystem/
ESCB IT systems, the production and issuance of euro banknotes,
and the participation in the work of the Joint OWG/COMCO
Task Force.
DC
C 5 4 1 13 1
95
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atio
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al in
201
1
cont. Table 1
INTERNATIONAL INSTITUTIONAL REPRESENTATION OF BANCO DE PORTUGAL IN 2011
Sco
pe
Str
uct
ure
Committee/Working group
Main activities
Str
uct
ura
l u
nit
Nu
mb
er
of
face
-to
-face
m
eeti
ng
s
Nu
mb
er
of
tele
con
fere
nce
s Memo: sub-structures
Nu
mb
er
Nu
mb
er
of
face
-to
-face
m
eeti
ng
s
Nu
mb
er
of
tele
con
fe-
ren
ces
Risk Management
Committee (RMC)Preparation and monitoring of non-standard monetary policy
measures; monitoring of counterparties with outstanding
Eurosystem credit operations; analysis, from a risk management
perspective, of the future operational framework for monetary
policy and several aspects related to the management of the
foreign currency reserves of the Eurosystem.
DM
R 6 28 3
Human Resources
Conference (HRC)Identification of opportunities and formulation of
recommendations for common training opportunities among
NCBs; proposal of measures to promote staff mobility among
NCBs; exchange of information on HR practices and policies
(e.g. teleworking, performance management); review of the
HRC Darwin space and of the ESCB HR Website.
DRH 3
Task Force on Sensitive
InformationIdentifi cation of common rules and minimum standards for
handling sensitive information at ESCB level.
DRI
1
Other DO
I
2 3
Eu
rop
ean
Un
ion
Council of
the European
Union
Informal ECOFIN Monitoring of the economic and fi nancial developments,
including in sovereign debt markets and defi nition of operational
strategies; fi nancial stability and fi nancial sector developments;
fi nancial services reforms; preparation of IMF/World Bank
(WB) meetings.
AD
M 2
Working Party on
Financial Services - CRD
IV / CRR
Analysis and negotiation of Commission proposals to strengthen
the regulation of the banking sector: the Capital Requirements
Directive (CRD IV) regulates the taking up and pursuit of the
business of credit institutions and the Capital Requirements
Regulation (CRR) establishes the prudential requirements
institutions must comply with.
DSP 5
Working Party on
Financial Services
- Mortgage Credit
Directive Expert Group
Discussion of a proposal for a Mortgage Credit Directive
presented by the European Commission on 31 March 2011
(under discussion at the end of 2011).
DSC 15
Working Party on
Financial Services - MiF
II Expert Group
Discussion of proposals for a Directive (MiFID II) and a Regulation
(MiFIR) on markets in fi nancial instruments published by the
European Commission on 20 October 2011. The proposal for
a Directive extends conduct of business rules to be established
in MiFID II to structured deposits.
DSC 2
European
Systemic Risk
Board (ESRB)
General Board Analysis and assessment of risks to fi nancial stability and
vulnerabilities of a systemic nature in the EU. Adoption of
decisions on institutional, procedural and organisational aspects
and the relationship with the European supervisory authorities.
Issuing of recommendations on lending in foreign currencies,
US dollar denominated funding of credit institutions and
macro-prudential mandate of national authorities.
AD
M/D
SP 4 2
– Advisory Technical
Committee (ATC)Technical analysis and discussion of several issues in preparation
of General Board meetings, specifi cally: risks and potential
vulnerabilities for fi nancial stability in the EU; drawing up of
recommendations.
DEE/ D
SP 4 7 10 6
European
Banking
Authority
(EBA)
Board of Supervisors Development of banking sector regulation; convergence
of practices across supervisory colleges; identifi cation and
quantifi cation of systemic risk in cooperation with the ESRB;
performance of EU-wide stress test exercises and capital
enhancement exercise to restore confi dence and stability in
the markets.
AD
M/D
SP 4 4 1 6
– Standing Committee
on Regulation and
Policy (SCRePol)
Contribution to the preparation of binding or non-binding rules
on the areas of banking, payments, e-money, and intervention
in fi nancial institutions in fi nancial diffi culty and resolution.
DSP 2 11 38 10
– Standing Committee
on Oversight and
Practices (SCOP)
Contribution to the development of procedures on the
identifi cation of vulnerabilities, in cooperation with other
supervisory authorities, specifi cally regarding the functioning
of supervisory colleges and joint decisions on capital adequacy
and risk assessment; and development of common supervisory
standards.
DSP 3 5 9 4
96
cont. Table 1
INTERNATIONAL INSTITUTIONAL REPRESENTATION OF BANCO DE PORTUGAL IN 2011Sco
pe
Str
uct
ure
Committee/Working group
Main activities
Str
uct
ura
l u
nit
Nu
mb
er
of
face
-to
-face
m
eeti
ng
s
Nu
mb
er
of
tele
con
fere
nce
s Memo: sub-structures
Nu
mb
er
Nu
mb
er
of
face
-to
-face
m
eeti
ng
s
Nu
mb
er
of
tele
con
fe-
ren
ces
BA
NC
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OR
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A
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STA
TEM
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201
1 – Standing Committee
on Accounting,
Reporting and Audi-
ting (SCARA)
Contribution to developments in accounting, reporting, auditing
and transparency. DSP 2 6 14 17
– EBA/ECB Impact
Study Group
Analysis and preparation of quantitative impact studies on the
regulatory framework; data collection to monitor developments
in minimum capital requirements under Directives 2006/48/
EC and 2006/49/EC; analysis of the pro-cyclical effects of the
Capital Requirements Directive (CRD).
DSP 5 1
– Standing Committee
on Financial Inno-
vation
Implementation of EBA’s mandate in the area of fi nancial
innovation and consumer protection, specifi cally by promoting
transparency, simplicity and fairness in retail banking markets,
monitoring of its functioning, analysis of innovative practices
and assessment of the impact of product characteristics and
distribution processes.
DSC 2 1 2
Economic
and Financial
Committee
(EFC)
Economic and Financial
Committee (EFC)
Monitoring of the economic and fi nancial developments in
Member States and the Union; stress test exercise performed
by the EBA; fi nancial sector developments and reforms;
coordination of EU positions at international level; preparation
of ECOFIN Council’s works and decisions, including its informal
meetings.
AD
M/G
AB 11 2
– EFC - Alternates Preparation of EU positions at the international level (G20
and IMF); monitoring of the economic and fi nancial situation;
preparation of the EFC annual report on the movement of
capital and the freedom of payments.G
AB 2
– EFC - Sub-
-Committee on IMF
and Related Issues
(SCIMF)
Contributions to EU positions at the G20 and the IMF, in
particular regarding issues on the reform of the international
monetary system (including the management of capital fl ows;
governance, supervision and IMF fi nancing instruments and
special drawing rights (SDR) basket).
DRI
4 4
– EFC Sub-Committee
on EU sovereign
debt markets (ESDM)
Monitoring of developments in European sovereign debt
markets, in particular the impact and challenges posed by the
sovereign debt crisis in the euro area; preparation of standardised
Collective Action Clauses (CACs) for all Member States.
DM
R 5 2
– EFC - Euro Coin Sub-
-Committee (ECSC)
Authentication of euro coins and handling of coins unfi t
for circulation; monetary agreements with third parties;
commemorative coin to mark 10 years of the euro; consolidation
of provisions relating to euro coins; technical specifi cations
of coins; cross-border cash transport; protection of the
authentication of euro coins.
DET 3
Economic
Policy
Committee
(EPC)
Economic Policy
Committee (EPC)
Implementation of alert mechanisms under the European
Semester. Discussion of European economic policy in structural
areas such as employment, energy and national budgets.
DEE 9 3 8
European
Securities and
Market Autho-
rity (ESMA)
European Enforcers
Coordination Sessions
(EECS)
Coordination of accounting enforcement activities among
Member States, in order to contribute to consistent application
of IAS/IFRS.
DSP 7 1
Joint
Committee
of European
Supervisory
Authorities
(EBA / ESMA /
EIOPA)
Joint Committee
on Financial
Conglomerates (JCFC)
Prudential issues and on sanctions related to the Financial
Conglomerates Directive and identifi cation and assessment
of potential risks from fi nancial conglomerates. This includes
participation in Workstream 3 (on sanctions and strengthening
enforcement), under a call for advice from the European
Commission on this Directive.
DSP/D
AS 6 1 1 3
– Anti Money Laun-
dering Task Force
(AMLTF)
Conclusion of the protocol for cooperation among supervisors;
preparation of a cross-sectional report on the identifi cation of the
ultimate benefi cial owner (UBO); preparation of a cross-sectional
report on the implementation of simplifi ed due diligence (SDD).
DA
S 4
97
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exes
| I
nter
natio
nal i
nstit
utio
nal r
epre
sent
atio
n of
Ban
co d
e Po
rtug
al in
201
1
cont. Table 1
INTERNATIONAL INSTITUTIONAL REPRESENTATION OF BANCO DE PORTUGAL IN 2011
Sco
pe
Str
uct
ure
Committee/Working group
Main activities
Str
uct
ura
l u
nit
Nu
mb
er
of
face
-to
-face
m
eeti
ng
s
Nu
mb
er
of
tele
con
fere
nce
s Memo: sub-structures
Nu
mb
er
Nu
mb
er
of
face
-to
-face
m
eeti
ng
s
Nu
mb
er
of
tele
con
fe-
ren
ces
European
Commission
European Banking
Committee
Development of EU banking legislation and policy issues
regarding banking activity, providing opinion on implementation
measures to be adopted under the EU Directives.
DSP 4
European Financial
Conglomerates
Committee
Adoption of measures implementing the Financial
Conglomerates Directive.
DSP 2
Early Intervention
Working Group
Preparation of a legislative proposal on crisis management and
resolution measures.
DSP 4
Capital Requirements
Directive Working
Group
Preparation of a legislative proposal revising the Capital
Requirements Directive (CRD) to strengthen regulation of the
banking sector.
DSP 4 1 3
European Group of
Auditors’ Oversight
Bodies
Advise to the Commission on the adoption of implementation
measures for the Directive on Statutory Audit and cooperation
between public cooperation systems for statutory auditors
and audit fi rms. DSP (C
NSA
)
1
Committee on Credit
Agreements for
Consumers
Review of the APR calculation method laid down in Directive
2008/48/EC on credit agreements for consumers. DSC 6
Committee on the
Prevention of Money
Laundering and
Terrorist Financing
Analysis of topics relating to payment and electronic money
services provision and the application of Regulation No
1781/2006; listing of equivalent third countries; drafting of the
revision of Directive 2005/60/EC; coordination and preparation
of the FATF plenary meetings.
DA
S 3
Eurostat Balance of Payments
Committee
Presentation of the main conclusions of the quality reporting
for balance of payments (BoP) statistics for 2010 and the draft
amendments to the BoP regulation (concept harmonisation
and alterations to the reporting basis). Discussion of the
indicators to use in regard to prevention and correction of
macroeconomic imbalances.
DD
E 1
Eurostat European Committee of
Central Balance Sheet
Data Offi ces (ECCBSO)
Content defi nition of the ‘net worth at risk revisited’ study and
scheduling of associated implementation activities. The study
will focus on applying the concept of ‘net worth at risk’ to a wider
spectrum of companies, referencing complementary analyses.
DD
E 1 4 8
Eurostat Committee on
Monetary Financial and
BOP Statistics (CMFB)
Approval of the CMFB Work Programme for 2011-2012.
Publication of a book commemorating 20 years of the CMFB.
Activities related to the Excessive Defi cit Procedure (EDP).
Analysis of statistical implications of legislative initiatives under
the prevention and correction of macroeconomic imbalances
and the sustainability of public fi nances.
DD
E 3 5 8
Eurostat – CMFB Executive
Body
Preparation of the CMFB’s plenary meetings.
DD
E 3
Eurostat Euroindicators Working
Group
Presentation of developments in the Euroindicators, Eurotrend
activities and other associated topics for 2009-2010 and the
2011 work plan. Discussion of issues relating to seasonal
adjustment, revisions, fl ash estimates and composite indicators.
DD
E 1
European
Commission/
Eurostat
Other
DET/
DPG 5 12
Other
DPG 2 6 13
98
cont. Table 1
INTERNATIONAL INSTITUTIONAL REPRESENTATION OF BANCO DE PORTUGAL IN 2011Sco
pe
Str
uct
ure
Committee/Working group
Main activities
Str
uct
ura
l u
nit
Nu
mb
er
of
face
-to
-face
m
eeti
ng
s
Nu
mb
er
of
tele
con
fere
nce
s Memo: sub-structures
Nu
mb
er
Nu
mb
er
of
face
-to
-face
m
eeti
ng
s
Nu
mb
er
of
tele
con
fe-
ren
ces
BA
NC
O D
E P
OR
TU
GA
L |
A
CTI
VIT
IES
AN
D F
INA
NC
IAL
STA
TEM
ENTS
201
1
Po
rtu
gu
ese
-sp
eakin
g c
ou
ntr
ies
Lisbon Meeting Public session on various topics relating to the international economic and fi nancial environment with particular focus on Portuguese-speaking countries. Two restricted sessions approached multilateral cooperation between the Portuguese-speaking central banks and the annual meeting agenda of the IMF/WB respectively.
AD
M/D
RI/
GA
B/… 1
Banking Supervision Meeting
Covering the different aspects of banking supervision, the meeting split into three working sessions on the following topics: regulatory reform at international level, prevention of money laundering and terrorist fi nancing and the importance of banking conduct supervision for fi nancial stability.
AD
M/D
AS/
DSC
/ DSP/ D
RI
1
IT and Communication Systems Forum
The main subjects debated were IT/systems governance and outsourcing, business continuity plans, network architecture and information system security. The use of the Portal dos Bancos Centrais dos Países de Língua Portuguesa - BCPLP (Central Banks’ Portal for Portuguese-speaking Countries) was also assessed.
AD
M/D
OI
1
Accounting, Internal Control Models and Risk Assessment Meeting
The two main topics, divided into various specifi c presentations, were the implementation of the various risk control models in the central banks and the policies adopted by them to implement the International Financial Reporting Standards (IFRS). Working methods to be adopted by this new Portuguese-speaking cooperation initiative were also addressed.
DC
C 1
Money-Issue and Treasury Meeting
The work sessions debated various topics, including management of the treasury function, relationships with banknote producers, banknote counterfeiting and securities custody.
DET 1
Human Resources Meeting
Collected under the overarching theme of ‘Institutional governance and strategic personnel management’, this meeting approached various specifi c HR topics, including social responsibility policy, HR management’s role in defi ning central bank strategy, and the codes of conduct of central banks.
DRH 1
Exchange Rate Cooperation Agreement between Portugal and Cape Verde (ACC)
ACC Commission (COMACC)
Various technical issues were discussed, in the context of instruments defi ned by the ACC in pursuit of its goals: the promotion of macroeconomic and fi nancial stability in Cape Verde and the strengthening of economic and fi nancial ties with Portugal and the euro area.
DRI
2
Macroeconomic Monitoring Unit (UAM-ACC)
The technical teams responsible for the ACC’s macroeconomic monitoring (one of its pillars along with the fi xed exchange rate and the credit facility) drew up situation reports and drafted other technical documents in support of the COMACC.
DRI
2
Economic Cooperation Agreement between Portugal and São Tomé and Príncipe (ACE)
ACE Commission (COMACE)
Debate and refl ection on various key issues, in the context of the ACE in pursuit of its goals: the promotion of macroeconomic and fi nancial stability in São Tomé and Príncipe and the strengthening of economic and fi nancial ties with Portugal and the euro area.
DRI
2
Macroeconomic Monitoring Unit (UAM-ACE)
The technical teams responsible for the ACE’s macroeconomic monitoring (one of its pillars) drew up situation reports and drafted other technical documents in support of the COMACE.
DRI
2
Oth
er
inte
rna-
tio
nal m
eeti
ng
s
International Monetary Fund (IMF)
Annual Meetings Global economic and fi nancial situation; IMF action plan for the international monetary system, distinguishing between responding to more immediate threats and medium-term priorities relating to reforming the system and achieving a common understanding of areas deemed fundamental for promoting global stability.
GO
V 1
Spring Meetings Global economic and fi nancial situation; role of the IMF in responding to global challenges and threats, including monitoring and supervising growing fi nancial interlinkages, strengthening the global fi nancial safety net and supporting low-income countries.
GO
V 1
99
Ann
exes
| I
nter
natio
nal i
nstit
utio
nal r
epre
sent
atio
n of
Ban
co d
e Po
rtug
al in
201
1
cont. Table 1
INTERNATIONAL INSTITUTIONAL REPRESENTATION OF BANCO DE PORTUGAL IN 2011
Sco
pe
Str
uct
ure
Committee/Working group
Main activities
Str
uct
ura
l u
nit
Nu
mb
er
of
face
-to
-face
m
eeti
ng
s
Nu
mb
er
of
tele
con
fere
nce
s Memo: sub-structures
Nu
mb
er
Nu
mb
er
of
face
-to
-face
m
eeti
ng
s
Nu
mb
er
of
tele
con
fe-
ren
ces
Bank for
International
Settlements
(BIS)
Annual General
Meeting
Issues arising from shareholder relationships, approval of
accounts and the BIS Annual Report. GO
V 1
Meeting of Governors Topics from the international fi nancial agenda, including
developments and risks in the global economic situation,
fi nancial market developments and policy initiatives aiming
to increase global fi nancial stability, in particular in the area
of fi nancial regulation.
GO
V 6
BIS Data Bank Management, reporting and functionality of the ‘BIS Data Bank’
database, in particular: data on debt securities statistics, real
estate price indices, Central Balance-Sheet Database, collection
of long data series on public indebtedness and credit to the
non-fi nancial sector.
DD
E 1
Heads of Security of
Central Banks
Exchange of information and experience in the physical security
area on threat analysis and implementation of best practice.
Includes analysis of some of the main incidents and preparation
of reports that served as a basis for the ongoing process of
analysing and managing operational risk.
DSA 5 18
Financial Stabi-
lity Board
Regional Consultative
Group for Europe
Brings together representatives of regulatory and fi nancial
supervision authorities from FSB members (representing G20
countries) and authorities of some non-member European
countries (such as Portugal), constituting an institutional
mechanism that aims to facilitate the exchange of views on
vulnerabilities in the fi nancial systems and debate on initiatives
(ongoing or potential) to promote fi nancial stability.
AD
M 1
CEMLA Meeting of Central
Bank Internal Auditors
Topics debated included, among others, quality certifi cation
of audit departments, their role in corporate governance of
central banks and the intervention of auditors in international
fi nancial crises.
DA
U 1
OECD Economic Policy
Committee
Aside from monitoring the international economic and fi nancial
developments, structural and sustainable growth issues were
particularly relevant in 2011.
DEE 2
Working Party No 1
(WP1)
The WP1 agenda in 2011 focused on growth issues, in particular
structural reforms in bad times. DEE 2 1 2
Working Party on
Financial Statistics
Household risk assessment and analysis of experiences in
different countries in this area, in particular, with regard to
the different indicators used. Discussion of the challenge
presented by an ageing population. Decision to constitute
a task force of national experts, with the aim of compiling a
glossary in this fi eld.
DD
E 1 1 2
Committee on Financial
Markets (CFM)
Monitoring of key developments in fi nancial markets and
promotion of international cooperation, identifying policies
and measures that aim to ensure the effi cient operation of the
markets and preserve fi nancial stability. Holding ‘round tables’
with industry representatives, ‘tours de table’ and conferences,
including topics such as fi nancial system guarantees and fi nancial
education (INFE). In this area, the ‘High Level Principles on
Financial Consumer Protection’ were analysed and approved
for presentation to the G20.
DSP/ D
SC 2
– Task Force on
Financial Consumer
Protection
Preparation of the ‘High-Level Principles on Financial Consumer
Protection’, which were adopted by the G20 in October 2011. DSC 1 2
AfDB AfDB Annual Meeting Collected under the overarching theme ‘Towards an Agenda
for Inclusive Growth in Africa’, the different sessions tackled
a wide variety of subjects (HIPC and MDRI initiatives, NEPAD
developments, the problems of drinking water supply, etc.),
as well as aspects relating to the institution’s balance sheet
and accounts.
DRI
1
100
cont. Table 1
INTERNATIONAL INSTITUTIONAL REPRESENTATION OF BANCO DE PORTUGAL IN 2011Sco
pe
Str
uct
ure
Committee/Working group
Main activities
Str
uct
ura
l u
nit
Nu
mb
er
of
face
-to
-face
m
eeti
ng
s
Nu
mb
er
of
tele
con
fere
nce
s Memo: sub-structures
Nu
mb
er
Nu
mb
er
of
face
-to
-face
m
eeti
ng
s
Nu
mb
er
of
tele
con
fe-
ren
ces
BA
NC
O D
E P
OR
TU
GA
L |
A
CTI
VIT
IES
AN
D F
INA
NC
IAL
STA
TEM
ENTS
201
1 European Association for Banking and Finance History (EABH)
Promotion of research on banking and fi nance history and respective dissemination through publications (self-publishing or other publishers) and organisation of conferences and workshops. Development and maintenance of archival resources, in particular the organisation, advising and preparation of codes of best practice and legal recommendations.
DSA 3
International Network on Financial Education (INFE)
Advisory Board Advice and guidance structure of the INFE’s work and operational model. D
SC 2
Plenary Session Defi nition of principles and best practice on fi nancial education, including fi nancial education at school, assessment of fi nancial literacy, defi nition of national strategies, fi nancial inclusion and savings incentives. Promotion of international cooperation in fi nancial education.
DSC 2 2 4
International Financial Consumer Protection Network (FinCoNet)
Governing Council Discussion of market conduct regulatory and supervisory principles in retail fi nancial markets. In 2011 the process of institutionalising FinCoNet began and the Governing Council was elected, on which Banco de Portugal is represented.
DSC 1
Plenary Session
DSC 2
Financial Action Task Force (FATF)
Plenary meetings Mutual evaluation and issue of recommendations as part of international fi nancial action. D
AS 3
– International Coope-ration Review Group
– Working Group on Evaluations and Implementation (Expert Group A and Expert Group B)
– Working Group on Terrorist Financing and Money Laun-dering
– Asia/Pacifi c Group on Money Launde-ring, APG
– Working Group on Typologies
Revision of the FATF Recommendations, in particular to assess the system against money laundering and terrorist fi nancing. D
AS 8
Other
DET
/ D
SP / D
OI
6 6
SUM 337 308 161 428 123
101
Ann
exes
| P
rese
ntat
ions
at
sem
inar
s an
d co
nfer
ence
s
Table 2 Structural units represented
PRESENTATIONS AT SEMINARS AND CONFERENCES
Sco
pe
Organisation EventNumber of
presentations
Structural units
represented
Inte
rnati
on
al
American Economic Association ASSA Annual Meeting 2011 3 DEE
Association of Southern-European Economic Theorists (ASSET)
2011 ASSET Annual Meeting 1 DEE
South African Reserve Bank South African Reserve Bank Flow of Funds Seminar 1 DDE
Danmarks Nationalbank Workshop on Optimising the Data Checking Process of Banking Statistics
2 DDE
European Central Bank (ECB)/ ESCB 1st MARS Conference 3 DEE
3rd Financial Stability Conference 1 DEE
4th Swiss Winter Conference on Financial Intermediation 1 DEE
Economics Conference on Emerging Europe 1 DEE
13th ECB and its watchers Conference 1 DEE
CSDB Business Co-ordination Group 1 DDE
Working Group on Government Finance Statistics 1 DDE
Task Force on FISIM 1 DDE
Workshop on Securitisation and FVC Statistics 1 DDE
ECB Financial Accounts Seminar 2011 1 DDE
ECB/Banque de France Joint Seminar on statistics for managers 2 DDE
Banque de France/ CEPR/ECARES The Financial Crisis: Lessons for International Macroeconomics
3 DEE
Banque de France/Oesterreichische Nationalbank/Joint Vienna Institute
Seminar on elaborating and using ratings and data on corporate fi rms
1 DDE
Banco de Portugal 1st Conference on Financial Literacy 2 DSC
Banco de Portugal Labour market 1 DEE
Banco de Portugal/ Banco Nacional de Angola Seminar on the IMF/WB Financial Sector Assessment Program (FSAP)
1 DSP/FGD
National Bank of the Republic of Macedonia/
De Nederlandsche Bank
4th Conference on Payment and Securities Settlement Systems
1 DPG
Banco Nacional de Angola 3rd Money-Issue and Treasury Meeting of the Central Banks of the Portuguese-speaking countries
1 DET
1st Accounting, Internal Control Models and Risk Assessment Meeting
1 DCC
Bank of Greece 10th Conference on Research on Economic Theory & Econometrics
2 DEE
Central Bankers’ Club (CBC) Biennial CBC meeting 2 DOI
Centre for Economic and International Studies XX International Tor Vergata Conference 1 DEE
Community of Portuguese Speaking Countries
1st Banking Supervision Meeting 3 DAS/DSC/DSP
Econometric Society 2011 Asian Meeting of the Econometric Society 1 DEE
North American Winter Meeting of the Econometric Society 1 DEE
Einaudi Institute for Economics and Finance (EIEF)
EIEF and RCEI Annual Meeting 1 DEE
Escola Superior do Ministério Público da União (Higher School of the Public Prosecution Service of Brazil)/ European Commission
International seminar on the fi ght against counterfeiting, prospects considering the strengthening of the real and new research techniques
1 DET
European Trade Study Group (ETSG) 13th ETSG Conference 1 DEE
European Association of Labour Economists (EALE)
23rd EALE Conference 3 DEE
European Committee of Central Balance-Sheet Data Offi ces
ECCBSO Meetings 3 DDE
102
cont. Table 2
PRESENTATIONS AT SEMINARS AND CONFERENCESS
cop
e
Organisation EventNumber of
presentations
Structural units
represented
BA
NC
O D
E P
OR
TU
GA
L |
A
CTI
VIT
IES
AN
D F
INA
NC
IAL
STA
TEM
ENTS
201
1
Inte
rnati
on
al
European Economic Association EEA-ESEM 2011 6 DEE
Eurostat NTTS 2011 - Conference on New Techniques and Technologies for Statistics
1 DDE
IMF IMF Outreach seminar 1 DDE
European University Institute Conference on New Developments in Time Series Econometrics
1 DEE
Italian Economic Association (Societá Italiana degli Economisti - SIE)
52 RSA Roma 2 DEE
Independent World Forum for Central Bankers and Financial Supervisors
Current challenges and the future of central bank statistics 1 DDE
Institute of Global Finance 24th Australasian Finance & Banking Conference 1 DEE
International Institute of Forecasters 31st Annual International Symposium on Forecasting 2 DEE
International Network on Financial Education (INFE)
8th Meeting of the International Network on Financial Education
1 DSC
International Statistical Institute 58th World Statistics Congress (ISI 2011) 8 DDE
OECD Workshop on the implementation of the 2008 SNA 1 DDE
1st Meeting of the OECD Task Force on Financial Consumer Protection
1 DSC
OECD-Banque du Liban International Conference on Financial Education: Building Financially Empowered Individuals
1 DSC
Portuguese Economic Journal (PEJ) 5th Annual Meeting of the PEJ 1 DEE
Hungarian EU Presidency Conference on “Communication: a tool to enhance statistical culture”
1 DDE
Society for Economic Dynamics Annual Meeting 2011 1 DEE
Society of Labor Economists 6th Society of Labor Economists Meeting 2 DEE
Society for the Advancement of Economic Theory (SAET), Royal Economic Society
11th SAET Conference 3 DEE
Royal Economic Society Annual Conference 1 DEE
Universidad de Alicante 7th ETSERN Meeting 1 DEE
University of Crete Annual International Conference on Macroeconomic Analysis and International Finance
1 DEE
Sum of international events 89
103
Ann
exes
| P
rese
ntat
ions
at
sem
inar
s an
d co
nfer
ence
s
cont. Table 2
PRESENTATIONS AT SEMINARS AND CONFERENCES
Sco
pe
Organisation EventNumber of
presentations
Structural units
represented
Nati
on
al
Portuguese industrial and commercial coffee
association (AICC)
AICC Forum - Dissemination of sectoral studies 1 DDE
Portuguese Association of Classifi cation and
Data Analysis (CLAD) and University of Trás-
os-Montes and Alto Douro
XVIII Journeys of Classifi cation and Data Analysis:
Presentation on Banco de Portugal statistics
1 DDE
Portuguese Association of Leasing, Factoring
and Renting - ALF
ALF Forum - Dissemination of sectoral studies 1 DDE
Banco de Portugal First Conference of the Central Balance-Sheet Database of
Banco de Portugal
4 DDE
Polish-Portuguese Chamber of Commerce Poland - A Priority Market for the Portuguese Investments,
Challenges for the future
1 DDE
Statistical Council (CSE) Standing Section of Economic Statistics Meetings 2 DDE
Santarém School of Management and
Technology
Dissemination of Banco de Portugal and Central Balance-
Sheet Database statistics
2 DDE
Faculty of Economics at the University of
Porto
Dissemination of Banco de Portugal and Central Balance-
Sheet Database statistics
2 DDE
Nova School of Business & Economics Dissemination of Banco de Portugal statistics 4 DDE
School of Economics and Management (ISEG) Dissemination of Banco de Portugal statistics 3 DDE
Institute of Accounting and Administration of
Porto (ISCAP)
Dissemination of Banco de Portugal and Central Balance-
Sheet Database statistics
2 DDE
Higher Institute of Statistics and Information
Management (ISEGI-NOVA)
Dissemination of Banco de Portugal statistics 1 DDE
Prosecutor General's Offi ce Seminar on the role of Banco de Portugal in the prevention
of money laundering and terrorist fi nancing and of
unauthorised fi nancial activities
1 DAS
Turismo Portugal XXXVII APAVT National Congress 1 DDE
Portuguese Catholic University Dissemination of Banco de Portugal and Central Balance-
Sheet Database statistics
2 DDE
Sum of national events 28
TOTAL 117
105
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exes
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issu
ance
A.2.6. CURRENCY ISSUANCE
BANKNOTES
At the end of December 2011, 14,948 million banknotes were in circulation in the euro area, with a
value of €888.6 billion, i.e. a 5.8% increase from the last day of the previous year (Chart 1).
Chart 1
DEVELOPMENTS IN BANKNOTE CIRCULATION IN THE EUROSYSTEM | 2002-2011
Source: ECB.
As in previous years, the denominations with the largest share in total circulation in terms of value were the
€500 banknote (33.7%), the €50 banknote (34.0%) and the €100 banknote (18.6%), as seen in Chart 2.
Chart 2
STRUCTURE OF BANKNOTE CIRCULATION IN THE EUROSYSTEM (VALUE) | 2011
Source: ECB.
This analysis is only feasible for the Eurosystem aggregate and cannot be used to calculate euro banknote
circulation in each Member State. Cash migration fl ows resulting from the free movement of persons
and goods render impossible any analysis on the basis of the indicator of banknotes put into circulation
by an NCB. This indicator may be calculated but does not correspond to the real level of circulation.
Nevertheless, a theoretical indicator assigns each Eurosystem participant a share of the total circulation
by allocating the liabilities in respect of the issue of the value of euro banknotes in circulation in accor-
dance with the banknote allocation key. Of the total, 8% are assigned to the ECB, while the remaining
92% are allocated to the NCBs. Accordingly, the item ‘Banknotes in circulation’ in the balance sheet of
Banco de Portugal (which translates this theoretical allocation of euro banknotes in circulation) recorded
€20,452 million at the end of December 2011.
106
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NC
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OR
TU
GA
L |
A
CTI
VIT
IES
AN
D F
INA
NC
IAL
STA
TEM
ENTS
201
1
Withdrawals and deposits at Banco de Portugal
In terms of value, in 2011 banknote withdrawals and deposits resulted in a negative net fl ow, as withdra-
wals were lower than deposits, in line with previous years.
This is directly related to the infl ow into Portugal of euro banknotes issued by other Eurosystem NCBs,
in particular via tourism, which are deposited at Banco de Portugal by credit institutions, given that they
exceed demand needs.
In terms of value, withdrawals decreased by 1.4%, while deposits increased by 8.5% compared with
2010 (Chart 3).
Chart 3
BANKNOTE WITHDRAWALS AND DEPOSITS AT BANCO DE PORTUGAL (VALUE) | 2002-2011
Source: Banco de Portugal.
Chart 4 shows that these movements are highly seasonal, experiencing wide and historically recurring
swings.
Chart 4
BANKNOTE WITHDRAWALS AND DEPOSITS AT BANCO DE PORTUGAL (VALUE) | 2011
Source: Banco de Portugal.
107
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ance
In terms of volume, deposits signifi cantly exceeded withdrawals for the fi rst time (Chart 5).
Chart 5
BANKNOTE WITHDRAWALS AND DEPOSITS AT BANCO DE PORTUGAL (VOLUME) | 2002-2011
Source: Banco de Portugal.
The amount of withdrawals in 2011 stood at €13,375 million, corresponding to 797.8 million banknotes.
The €20 banknote continues to have the largest share of withdrawals, accounting for around 54.6% of
the total, followed by the €10 and €50 banknotes. These three denominations as a whole account for
around 91.7% of withdrawals in terms of value (Table 1).
Table 1 106 banknotes, 106 EUR
DEVELOPMENTS IN BANKNOTE WITHDRAWALS AT BANCO DE PORTUGAL | 2010-2011
Denomination
(€)
2010 2011 Δ 2010 - 2011
% (value)Volume Value Value % Volume Value Value %
500 0.85 425.14 3,1 0.98 488.83 3.7 15.0
200 0.17 34.04 0,3 0.19 37.00 0.3 8.7
100 2.02 202.42 1.5 2.03 203.36 1.5 0.5
50 38.46 1,922.92 14.2 35.67 1,783.57 13.3 -7.2
20 372.85 7,457.05 54.9 365.13 7,302.50 54.6 -2.1
10 316.15 3,161.54 23.3 318.15 3,181.46 23.8 0.6
5 73.55 367.77 2.7 75.67 378.33 2.8 2.9
Total 804.06 13,570.87 100.0 797.81 13,375.05 100.0 -1.4
Source: Banco de Portugal.
Over the same period, €15,077 million was deposited at Banco de Portugal, corresponding to 808.0
million banknotes.
Although all denominations contributed to deposit growth compared to 2010, the largest contribution
came from higher denominations (Table 2).
108
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IES
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INA
NC
IAL
STA
TEM
ENTS
201
1
Table 2 106 banknotes, 106 EUR
DEVELOPMENTS IN BANKNOTE DEPOSITS AT BANCO DE PORTUGAL | 2010-2011
Denomination
(€)
2010 2011Δ 2010 - 2011
% (value)Volume Value Value % Volume Value Value %
500 0.67 335.62 2.4 1.19 596.62 4.0 77.8
200 0.60 119.36 0.9 0.77 154.45 1.0 29.4
100 5.99 599.33 4.3 7.11 711.02 4.7 18.6
50 58.27 2,913.50 21.0 65.24 3,261.92 21.6 12.0
20 327.56 6,551.15 47.1 341.00 6,820.03 45.2 4.1
10 300.60 3,006.04 21.6 313,81 3,138.14 20.8 4.4
5 74.83 374.17 2.7 78.91 394.53 2.6 5.4
Total 768.53 13,899.17 100.0 808.04 15,076.71 100.0 8.5
Source: Banco de Portugal.
In terms of value, the €10, €20 and €50 banknotes continued to have the largest share in deposits,
together accounting for 87.7% of the total (Chart 6).
Chart 6
STRUCTURE OF BANKNOTE WITHDRAWALS AND DEPOSITS AT BANCO DE PORTUGAL (VALUE) | 2011
Source: Banco de Portugal.
By denomination, the weight of banknotes withdrawn at Banco de Portugal is strongly infl uenced by the
denominations that are selected to be loaded in the automated teller machines (ATMs), which depend
on a combination of several factors, such as public preference and the establishment of a minimum
withdrawal amount (€10), the number of ATM cash cassettes and minimisation of loading costs.
In 2011 the two denominations most commonly withdrawn from ATMs (€10 and €20) accounted for
92.7% of total withdrawals, i.e. an increase of 1.2 percentage points (p.p.) compared to 2010 (Table 3).
109
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ance
Table 3 106 banknotes
BANKNOTE WITHDRAWALS AT ATMS | 2010-2011
2010 2011 Δ 2010 - 2011
Volume (%) Volume (%) Volume (p.p.)
500 0.00 0.0 0.00 0.0 0.00 0.0
200 0.00 0.0 0.00 0.0 0.00 0.0
100 0.00 0.0 0.00 0.0 0.00 0.0
50 16.71 0.9 14.81 0.8 -1.90 -0.1
20 945.06 51.8 937.17 52.3 -7.89 0.4
10 723.19 39.7 724.70 40.4 1.52 0.8
5 138.82 7.6 116.73 6.5 -22.09 -1.1
Total 1,823.78 100.0 1,793.42 100.0 -30.36 0.0
Source:SIBS.
By contrast, the €5 banknote’s share declined by 1.1 p.p., accounting for only 6.5% of total banknote
withdrawals. The €50 banknote only accounted for 0.8% of total withdrawals, decreasing by 0.1 p.p.
compared with the previous year.
Total banknote withdrawals decreased by 30.4 million banknotes (-1.7%) compared with the previous year.
Withdrawal from circulation of escudo banknotes
Delivery of escudo banknotes at Banco de Portugal via direct exchange with the public or through credit
institutions has been gradual and has followed a downward path.
During 2011, 1.6 million banknotes of all printing plates yet unexpired were delivered at the Banco
de Portugal cash offi ces. Around 28.5 million banknotes (corresponding to €174 million) are still to be
withdrawn from circulation compared with the circulation as at 31 December 2001 (Table 4).
Escudo banknotes may be exchanged up to twenty years after the respective printing plate’s withdrawal
from circulation. In 2011 the time limit expired for the exchange of the 1,000$00 banknote, printing
plate 11, effi gy D. Pedro V, the 30th King of Portugal (1837-1861). This note was fi rst issued on 15
November 1979 and was withdrawn from circulation on 31 October 1991.
110
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TEM
ENTS
201
1
Table 4 106 banknotes, 106 EUR
ESCUDO BANKNOTES | 2011
Denomination
Withdrawn from circulation in 2011
Volume Value
Withdrawn from
circulation by 31
Dec. 2001
In circulation
as at 31 Dec.
2001
Total
Withdrawn
from circulation
by 31 Dec. 2001
In circulation
as at 31 Dec.
2001
Total
10 000$ 0.00 0.01 0.01 0.18 0.52 0.71
5000$ 0.01 0.03 0.04 0.31 0.71 1.02
2000$ 0.00 0.01 0.01 0.02 0.11 0.14
(1) 1000$ 1.48 0.02 1.50 7.36 0.10 7.46
500$ 0.01 0.01 0.02 0.02 0,03 0.06
100$ 0.01 - 0.01 0.01 - 0.01
Total 1.52 0.08 1.60 7.91 1.48 9.39
Denomination
Still to be withdrawn from circulation as at 31 December 2011
Volume Value
Withdrawn from
circulation by 31
Dec. 2001
In circulation
as at 31 Dec.
2001
Total
Withdrawn
from circulation
by 31 Dec. 2001
In circulation
as at 31 Dec.
2001
Total
10 000$ 0.20 0.38 0.58 10.21 18.80 29.00
5000$ 1.08 1.49 2.57 26.93 37.25 64.18
2000$ 0.55 1.79 2.34 5.51 17.81 23.33
(1) 1000$ 2.75 3.87 6.62 13.70 19.29 33.00
500$ 3.78 4.47 8.25 9.42 11.14 20.56
100$ 8.19 - 8.19 4.08 - 4.08
Total 16.55 11.99 28.54 69.86 104.30 174.15
Source: Banco de Portugal.
(1) The time limit for the exchange of the 1,000$00 banknote, printing plate 11, expired on 1 November 2011
111
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ance
COINS
At the end of 2011, 97,760 million coins were in circulation in the euro area, corresponding to €23,073
million.
Since the euro cash changeover, coin circulation has followed an upward trend in terms of both value
and volume (Chart 7).
Chart 7
DEVELOPMENTS IN COINS IN CIRCULATION IN THE EUROSYSTEM | 2002 - 2011
Source: Banco de Portugal.
Nevertheless, the annual increase from 2010 to 2011 was below that seen from 2009 to 2010, standing
at 5.2% and 3.6% in terms of volume and value respectively.
Low-value coins (1, 2 and 5 cent coins) had the largest share in terms of volume, accounting for 61.3%
of total coins. In terms of value, however, coin circulation at the end of 2011 was as follows (Chart 8).
Chart 8
STRUCTURE OF COIN CIRCULATION IN THE EUROSYSTEM (VALUE) | 2011
Source: Banco de Portugal.
As in banknotes, there is no indicator that mirrors the real level of coin circulation in Portugal for the
reasons stated.
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Withdrawals and deposits at Banco de Portugal
In 2011 the value of coin withdrawals at Banco de Portugal amounted to €42 million, corresponding to
148.9 million coins, i.e. a 17.0% decrease in terms of value compared to the previous year (€9 million
less). This downward trend is evident in all denominations, particularly in high-value coins (Chart 9).
Likewise, over the same period deposits totalled €41 million, corresponding to 81.4 million coins, i.e. a
15.9% decrease in terms of value (€8 million less).
Chart 9
COIN WITHDRAWALS AND DEPOSITS AT BANCO DE PORTUGAL (VALUE) | 2011
Source: Banco de Portugal.
An analysis of the structure of coin withdrawals and deposits at Banco de Portugal shows that, as in
previous years, high-value coins (€2, €1 and €0.50 coins) as a whole account for 89.9% and 90.9% of
withdrawals and deposits respectively (Chart 10).
Chart 10
STRUCTURE OF COIN WITHDRAWALS AND DEPOSITS AT BANCO DE PORTUGAL (VALUE) | 2011
Source: Banco de Portugal.
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Of total deposits, Banco de Portugal processed 79.4 million coins, of which 284,929 were considered
unfi t for circulation, corresponding to a rejection rate of 0.36%.
Commemorative coins
Table 5 shows information on commemorative coins issued in Portugal since the euro cash changeover,
including description (face value, name and alloy), year of issue, authorised issue limit and status at the
end of 2011 (i.e. issued or to be issued).
Table 5 103 coins
COMMEMORATIVE COINS ISSUED IN PORTUGAL
Denomination Alloy
Year of
issue
(DL)
Issue
limit Issued
To be
issued
TOTAL 9,260 7,863 1,397
EUR 2.00
50th anniversary of the Treaty of Rome
Brass/Cupronickel
2007
2,000 1,500 500
Brass/Cupronickel proof 15 5 10
Brass/Cupronickel BU(1) 35 14 21
Portuguese Presidency of the European
Union
Brass/Cupronickel
2007
2,000 1,250 750
Brass/Cupronickel proof 15 10 5
Brass/Cupronickel BU(1) 35 12 23
60th anniversary of the Universal Declara-
tion of Human Rights
Brass/Cupronickel
2008
1,000 1,000 0
Brass/Cupronickel proof 15 8 7
Brass/Cupronickel BU(1) 20 8 12
2nd Lusophone games
Brass/Cupronickel
2008
1,250 1,250 0
Brass/Cupronickel proof 15 6 9
Brass/Cupronickel BU(1) 20 5 15
10th anniversary of the Economic and
Monetary Union and the creation of the
euro
Brass/Cupronickel
2008
1,250 1,250 0
Brass/Cupronickel proof 15 6 9
Brass/Cupronickel BU(1) 20 6 14
Centenary of the Portuguese Republic
Brass/Cupronickel
2010
1,000 1,000 0
Brass/Cupronickel proof 15 9 6
Brass/Cupronickel BU(1) 20 7 13
500th anniversary of Fernão Mendes
Pinto’s birth
Brass/Cupronickel
2011
500 500 0
Brass/Cupronickel proof 10 7 3
Brass/Cupronickel BU(1) 10 10 0
Source: Banco de Portugal.(1) ‘BU’ means ‘Brilliant Uncirculated’, a type of fi nish..
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1Collector coins
Collector coins issued in Portugal since the euro cash changeover are shown in Table 6.
Table 6 103 coins
COLLECTOR COINS ISSUED IN PORTUGAL
Denomination AlloyYear of issue
(DL)Issue limit Issued
To be
issued
TOTAL 18,488 13,388 5,101
EUR 10.00 20th anniversary of the accession of Portugal to the European Communities
Silver2005
250 91 159
Silver proof 20 8 12
25th anniversary of Portugal and Spain’s accession to the European Union
Cupronickel2011
100 55 45
Silver proof 8 3 4
Olympic Games - Athens 2004Silver
2004 350 200 150
Silver proof 15 14 1
VIII Iberian-American Series - Historical Coins – “O Escudo”Silver
2005 100 75 25
Silver proof 12 4 8
Football World Championship - Germany 2006Silver
2005 250 107 143
Silver proof 25 14 11
Iberian-American countries at the Olympic GamesSilver
2007 100 70 30
Silver proof 18 7 11
NavigationSilver
2003 350 310 40
Silver proof 20 16 4
Oporto cathedralSilver
2005 300 122 178
Silver proof 20 7 13
Olympic Sailing World ChampionshipSilver
2007 150 70 80
Silver proof 8 5 3
EUR 8.00European Union Enlargement 2004
Silver2004
300 200 100
Silver proof 35 32 3
Football show – defence
Silver
2003
1,500 950 550
Gold proof 10 2 8
Silver BU(1) 30 11 19
Silver proof 15 11 4
Football values – sportsmanship
Silver
2003
1,500 1,5005
Gold proof 10 5
Silver BU(1) 30 219
Silver proof 15 15
Football values – celebration
Silver
2003
1,500 1,500
5Gold proof 10 5
Silver BU(1) 30 21 9
Silver proof 15 15
Football values – passion
Silver
2003
1500 1500 4
Gold proof 10 6
Silver BU(1) 30 219
Silver proof 15 15
Football show - the goal
Silver
2003
1,500 950 550
Gold proof 10 2 8
Silver BU(1) 30 11 19
Silver proof 15 11 4
60th anniversary of the end of World War IISilver
2005 300 132 168
Silver proof 35 28 7
Prince Henry the NavigatorSilver
2006 100 85 15
Silver proof 35 20 15
150th anniversary of the fi rst railroad connection between
Lisbon and Carregado
Silver2006
100 82 18
Silver proof 10 3 7
Bartolomeu de Gusmão’s Passarola (airship)Silver
2007 100 70 30
Silver proof 25 15 10
Football show - the shot
Silver
2003
1500 950 550
Gold proof 10 2 8
Silver BU(1) 30 11 19
Silver proof 11 4
EUR 7.50 The “Portuguese” coin of King Manuel ICupronickel
2011 150 73 77
Gold proof 3 2
Alcobaça MonasterySilver
2006 100 82 18
EUR 5.00 Silver proof 10 4 6
Historical centre of Angra do HeroísmoSilver
2005 300 123 177
Silver proof 15 4 11
Batalha MonasterySilver
2005 300 122 178
Silver proof 15 4 11
Convent of Christ in TomarSilver
2004 300 255 45
Silver proof 10 6 4
100th anniversary of the World Scouting MovementSilver
2007 150 80 70
Silver proof 10 6 4
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cont. Table 6 103 coins
COLLECTOR COINS ISSUED IN PORTUGAL
Denomination AlloyYear of issue
(DL)Issue limit Issued
To be
issued
EUR 5.00Historical centre of Évora
Silver2004
300 255 45
Silver proof 10 7 3
Madeira’s Laurissilva forestSilver
2007 100 75 25
Silver proof 8 4 4
European Year of Equal Opportunities for AllSilver
2007 100 70 30
Silver proof 8 4 4
800th anniversary of the birth of Pedro Hispano
Silver
2005
300 122 179
Gold proof 8 2 5
Silver proof 15 5 10
The Justo from King John IICupronickel
2009 150 78 73
Gold proof 3 1 1
150th anniversary of the fi rst Portuguese stamp
Silver
2003
300 300
Gold proof 10 3 7
Silver BU(1) 20 16 4
Silver proof 20 14 6
Cultural Landscape of SintraSilver
2006 100 82 18
Silver proof 10 5 5
EUR 2.502010 FIFA World Cup - South Africa
Cupronickel2010
120 120
Silver proof 13 4 9
Belém TowerCupronickel
2008 150 85 65
Silver proof 5 4 1
Capelo and Ivens - European explorers
Cupronickel
2011
100 77 23
Gold proof 2 1 1
Silver proof 9 6 3
Côa Valley Archaeological SiteCupronickel
2010 120 80 40
Silver proof 5 2 3
Vineyards of Alto DouroCupronickel
2008 150 90 60
Silver proof 5 3 2
FadoCupronickel
2008 150 100 50
Silver proof 20 12 8
Jerónimos MonasteryCupronickel
2008 150 85 65
Silver proof 5 4 1
The Portuguese language
Cupronickel
2008
150 84 67
Gold proof 3 2 1
Silver proof 15 10 5
Beijing Olympic Games Cupronickel
2008 488 488
Silver proof 13 9 4
Landscape of the Pico Island Vineyard CultureCupronickel
2011 100 77 23
Silver proof 5 5
Historical centre of OportoCupronickel
2008 150 95 55
Silver proof 5 3 2
100th anniversary of the Pupils of the Army CollegeCupronickel
2011 100 75 25
Silver proof 3 2 1
Bicentenary of Linhas de Torres Vedras defensive lineCupronickel
2010 120 80 40
Silver proof 5 3 2
Europe’s architectural heritage - Terreiro do Paço
Cupronickel
2008
120 95 25
Gold proof 3 1 1
Silver proof 15 7 8
EUR 1.50Against indifference - AMI
(International Medical Assistance)
Cupronickel
2008
50 50
Cupronickel MS(2) 300 123 177
Silver proof 5 4 1
One coin, one cause – one coin against hunger
Cupronickel
2010
100 100
Cupronickel MS(2) 100 8 92
Silver proof 5 2 3
Morabitino of King Sancho IICupronickel
2009 150 105 45
Gold proof 3 2
EUR 0.25 25th anniversary of Portugal and Spain’s accession to the European Union
Gold MS(2) 2011 13 4 8
King Afonso Henriques (12th century) Gold MS(2) 2006 30 24 6
Saint Anthony (13th century) Gold MS(2) 2006 30 20 10
King Dinis (14th century) Gold MS(2) 2006 30 15 15
Vasco da Gama (15th century) Gold MS(2) 2006 30 15 15
Luís Vaz de Camões (16th century) Gold MS(2) 2006 30 10 20
Father António Vieira (17th century) Gold MS(2) 2006 30 7 23
(1) ‘BU’ means ‘Brilliant Uncirculated’, a type of fi nish. Source : Banco de Portugal.(2) ‘MS’ means ‘Mint State’, a type of fi nish.
IIFINANCIAL STATEMENTS
1. PRESENTATION
2. FINANCIAL STATEMENTS
3. NOTES ON THE FINANCIAL STATEMENTS
4. EXTERNAL AUDITORS’ REPORT
5. REPORT AND OPINION OF THE BOARD OF AUDITORS
1. PRESENTATION
For the purposes laid down in Article 54 of the Organic Law of Banco de Portugal, this Report presents
the fi nancial statements for the year 2011 (see Sections 2. and 3.).49
The annual accounts of the Bank are subject to an external audit, pursuant to the provisions laid down
in Article 46 of the Organic Law of Banco de Portugal (see Section 4.). Pursuant to the provisions of
Article 43, the Board of Auditors prepared a report and issued an opinion on the fi nancial statements
(see Section 5.). The Advisory Board received the annual accounts and issued its opinion thereon.
1.1. Developments in the composition of the balance sheet
The table below shows the developments in the year-end positions of the main items of the balance
sheet of Banco de Portugal in the 2007-2011 period:
Table 1 EUR millions
2007 2008 2009 2010 2011 Δ 2011/2010
ASSETS 38,670 50,676 62,524 99,750 109,768 10,019
Gold 6,989 7,644 9,425 12,979 14,964 1,985
IMF (net) 89 148 263 298 306 7
Foreign reserves and euro assets (net) 14,786 14,533 15,064 19,183 16,011 (3,172)
Foreign currency 1,334 732 529 2053 594 (1,459)
Euro 13,452 13,800 14,535 17,130 15,417 (1,713)
Trading portfolio 9,375 9,179 9,138 11,259 9,351 (1,909)
Medium-term investment portfolio 4,077 4,621 5,397 5870 6,067 196Claims related to monetary policy opera-tions
2,464 10,210 16,708 45,060 53,270 8,210
Lending to credit institutions 2,464 10,210 16,061 40,899 46,002 5,103
Securities held for monetary policy purposes - - 648 4,161 7,269 3,108
Intra-Eurosystem claims 13,406 16,838 19,130 20,195 23,019 2,824
Participating interest and transfer of foreign reserve assets to the ECB
1,088 1,088 1123 1,152 1181 29
Other intra-Eurosystem claims 12,318 15,750 18,007 19,043 21,838 2,795
Other claims 879 1,245 1,056 1,101 1241 140
LIABILITIES AND EQUITY 38,670 50,676 62,524 99,750 109,768 10,019
Banknotes in circulation 15,346 17,254 18,608 19,376 20,452 1,076
Banknotes put into circulation (net) 3,041 1,575 663 333 (1369) (1,702)
Adjustments to circulation 12,305 15,679 17,945 19,043 21,821 2,778
Liabilities to credit institutions related to monetary policy operations
9,266 5,402 8,771 4,921 5,691 770
Liabilities to other entities denominated in euro
1 1 2 1 4,869 4,868
Intra-Eurosystem liabilities 6,206 18,953 23,436 59,921 60,964 1,043
Other liabilities 402 484 364 444 516 72
Provisions 1,984 2,157 2,400 2,519 2,947 429
Revaluation differences 3,971 4,788 6,479 10,055 12,061 2,007
Capital and reserves 1,155 1,230 1,330 1,381 1,278 (102)
Profi t for the year 282 349 254 198 31 (167)
49 Totals / sub-totals included in the fi nancial statements and respective notes may not add up due to rounding, since fi gures are presented in EUR thousands.
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Table 2 shows the balances for the year 2011 as well as the changes in the main items of the balance
sheet of Banco de Portugal, with a similar aggregation to the analyses made below:
Table 2 EUR millions
2011 Δ 2011/2010
a) Claims and liabilities related to monetary policy operations 47,579 7,440
Claims related to monetary policy operations 53,270 8,210
Liabilities to credit institutions related to monetary policy
operations(5,691) (770)
b) Gold, foreign reserves and euro assets (net) 30,975 (1,187)
Gold 14,964 1,985
Foreign reserves and euro assets (net) 16,011 (3,172)
c) Banknotes in circulation (20,452) (1,076)
d) Other balance sheet items 19,180 (1,969)
IMF (net) 306 7
Intra-Eurosystem claims 23,019 2,824
Other assets 1,241 140
Liabilities to other entities denominated in euro (4,869) (4,868)
Other liabilities (516) (72)
e) Intra-Eurosystem liabilities (60,964) (1,043)
f) Own funds 16,287 2,333
Provisions 2,947 429
Revaluation differences 12,061 2,007
Capital and reserves 1,278 (102)
1.2. Profi t for the year 31 (167)
a) Claims and liabilities related to monetary policy operations
The total (net) balance of monetary policy operations, carried out within the framework of the Eurosystem,
recorded a signifi cant increase in 2011 (€+7,440 million), albeit far lower than in 2010 (€+32,201 million)
(Chart 1).
Chart 1 EUR millions
CLAIMS AND LIABILITIES RELATED TO MONETARY POLICY OPERATIONS
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The most signifi cant changes were recorded in lending operations, both in regular lending to credit
institutions, and in securities portfolios held for monetary policy purposes, the latter within the scope of
the non-standard operations carried out under the Securities Market Programme (SMP) and the Covered
Bond Purchase Programmes (CBPP 1 and 2) (Chart 2).
Chart 2 EUR millions
AGGREGATES OF MONETARY POLICY OPERATIONS
Compared with December 2010, the increase in the volume of regular fi nancing operations refl ects the
current situation in fi nancial markets, leading national credit institutions to resort to fi nancing from the
Eurosystem, through Banco de Portugal. However, it should be noted that the increase in the volume
of refi nancing by national banks from the Eurosystem in 2011 (€+5,103 million) was far lower than the
rise seen in 2010 (€+24,838 million).
An intra-annual analysis shows that refi nancing peaked in mid-2011 and decreased thereafter, stabilising
somewhat until the end of the year (Chart 3). These intra-annual developments refl ect the launching of
the deleveraging programmes of national banks, within the framework of the Economic and Financial
Assistance Programme to Portugal. These developments were more signifi cant when compared with the
Eurosystem’s overall position, which recorded a rising trend over the year.
Chart 3 EUR millions
DAILY BALANCES IN REGULAR MONETARY POLICY OPERATIONS
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In the course of 2011, there was a signifi cant change in the breakdown by maturity of the regular fi nan-
cing operations, with long-term operations increasing from 57% to 85% of total lending operations.
These developments refl ect the fact that credit institutions decided to stabilise their fi nancing, lengthe-
ning the respective maturity, and benefi ting from the longer-term refi nancing operations launched by
the ECB (Chart 4).
Chart 4 EUR millions
DAILY BALANCES IN REGULAR MONETARY POLICY OPERATIONS
Turning to the portfolio of securities held for monetary policy purposes, growth refl ects the participation
of Banco de Portugal in the stabilisation programmes approved by the Eurosystem, as regards the shared
conduct of non-standard monetary policy operations. Thus, the overall amount of this portfolio incre-
ased by €3,108 million in 2011, chiefl y as a result of the enhancement of the stabilisation programme
under the Eurosystem’s SMP,50 in particular as from August and to a much smaller extent of the launch
in November 2011 of a second Covered Bond Purchase Programme (CBPP 2), which will be fully imple-
mented by the end of October 2012 (Chart 5). These portfolios are valued at cost and held-to-maturity.
Chart 5 EUR millions
DAILY BALANCES IN THE PORTFOLIOS OF SECURITIES HELD FOR MONETARY POLICY PURPOSES
50 Announced in May 2010 by the Governing Council of the European Central Bank (ECB).
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b) Gold, foreign reserves and euro assets (net)
• Gold
The gold reserve of Banco de Portugal remained virtually unchanged from 2010, in volume terms. There-
fore, the increase in the value of the gold reserve from December 2010 (€+1,985 million), was solely due
to a rise in the price of gold, followed by a change of an equivalent amount in the item ‘Revaluation
differences’.
Gold price movements refl ected its appreciation in US dollars, in line with both the trend seen in
previous years, and the positive evolution in the exchange rate of the US dollar against the euro in 2011
(Charts 6 and 7).
Chart 6 Chart 7
PRICE OF GOLD (Per fi ne ounce of gold) EXCHANGE RATE EUR/USD
• Foreign reserves and euro assets (net)
In 2011 the amount of reserve assets under management by Banco de Portugal declined compared with
2010 (€-3,172 million), refl ecting the Bank’s investment decision, within the fl exibility allowed by the
agreements concluded at Eurosystem level. This investment decision refl ects the balance between risk
and profi tability given the present economic and fi nancial situation.
The reduction was concentrated on the trading portfolio denominated in euro and foreign currency,
while the medium-term investment portfolio increased slightly (Chart 8).
Chart 8 EUR millions
FOREIGN RESERVES AND EURO ASSETS (net)
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Euro money market interest rates increased in the fi rst half of 2011 and declined in the second half,
chiefl y refl ecting market expectations and the ECB monetary policy decisions, amidst strong fi nancial
instability in the European sovereign debt market (Chart 9). Such instability strongly affected developments
in yields on the main European bond markets, where the majority of the Bank’s fi nancial investment
is concentrated. Yields were very different across markets, requiring an additional effort and increased
fl exibility in asset management (Charts 9, 10, 11 and 12). In annual average terms, there was a broadly
based rise in yields compared with 2010.
Chart 9 Chart 10
MONEY MARKET INTEREST RATES THREE-MONTH INTEREST RATES
Chart 11 Chart 12
TWO-YEAR INTEREST RATES TEN-YEAR INTEREST RATES
In terms of the composition by instrument, the trading portfolio denominated in euro and in foreign
currency, continues to be mainly composed of securities, similarly to previous years, with the deposits
and other money markets accounting for a very small share (Charts 13 and 14). This portfolio is valued
at market prices.
Charts 13 EUR millions Charts 14 EUR millions
COMPOSITION OF THE TRADING PORTFOLIO DENOMINATED IN FOREIGN CURRENCY
COMPOSITION OF THE TRADING PORTFOLIO DENOMINATED IN EURO
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The medium-term investment portfolio (Chart 15), fully denominated in euro, valued at acquisition cost
and held to maturity, continues to be almost exclusively composed of securities.
Chart 15 EUR millions
COMPOSITION OF THE MEDIUM-TERM INVESTMENT PORTFOLIO BY MATURITY
c) Banknotes in circulation and adjustments to circulation
The item Banknotes in circulation, recorded on the liabilities side of the balance sheet of Banco de
Portugal, refl ects the share allocated to Portugal of Banknotes in circulation in the Eurosystem. The value
disclosed under this balance sheet item corresponds to the sum of the difference between banknotes
put into circulation and banknotes withdrawn from circulation by the Bank, duly adjusted in accordance
with the Decision ECB/2001/15,51 offset against a remunerated intra-Eurosystem asset item recognising
banknotes issued (disclosed under Other intra-Eurosystem claims) (Chart 16). This item has maintained
the trend of continued growth recorded since the start of circulation of euro banknotes, refl ecting a rise
in overall circulation at the Eurosystem level.
Chart 16 EUR millions
BANKNOTES IN CIRCULATION AND ADJUSTMENTS TO CIRCULATION
d) Other balance-sheet items
In the year under review there was a signifi cant rise in the item Liabilities to other euro area residents
denominated in euro (€+4,868 million), resulting from a sharp rise in the balances of the general
government current accounts. These liabilities refl ect chiefl y the amount of the current accounts of the
Portuguese Treasury and Government Debt Agency (IGCP) arising from the transfer of funds from the
European Union (EU) and the International Monetary Fund (IMF), under the Economic and Financial
51 As amended by Decision ECB/2008/26 of 12 December.
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Assistance Programme to Portugal. Within the framework of this Programme, a protocol was signed by
Banco de Portugal and the IGCP, establishing the special accounts and the conditions under which the
Bank receives the disbursements under the Programme and makes the respective transfers of capital,
interest and expenditures to IGCP. This protocol is based on the principle of neutrality, so that the Bank
will have no profi t or loss as a result of the above-mentioned fi nancial assistance to Portugal.
With regard to other balance sheet items, it should also be noted with respect to Intra-Eurosystem claims,
that the second instalment was paid in December 2011, to the amount of €29 million, corresponding
to Banco de Portugal’s contribution to the increase in the ECB’s subscribed capital. The total increase in
subscribed capital, decided by the ECB at the end of 2010, amounts to €5 billion, with the contribution
of Banco de Portugal totalling €87.5 million, which shall be paid in three instalments. The fi rst instalment
was paid in December 2010 and the third will be due in December 2012.
e) Intra-Eurosystem liabilities
In December 2011, the value of Intra-Eurosystem liabilities was very close to the level recorded at the
end of 2010, as a result of the combined effect of changes among its main constituent items (Chart 17).
Chart 17 EUR millions
INTRA-EUROSYSTEM LIABILITIES AND MAIN OFFSETTING BALANCE SHEET ITEMS
The increase in liabilities arising from balances of TARGET accounts (€+1,043 million) refl ects basically
the combination of the rise in assets held for monetary policy purposes and the reduction in the amount
of banknotes put into circulation by Banco de Portugal. With opposite impacts on liabilities arising
from TARGET accounts, there was a rise in liabilities to the general government and liabilities to credit
institutions, as well as in the operations to reduce the Bank’s foreign reserves and euro assets portfolio
carried out in the course of 2011.
f) Own funds
In 2011 Banco de Portugal’s own funds (in broad terms, capital and reserves, provisions and revaluation
differences) presented an overall increase of €2,333 million, which had a main contribution from the rise
in positive gold revaluation differences (Chart 18). The rise in provisions also played a role, justifi ed by
the need to strengthen own funds in the current context of fi nancial market instability. The reduction
in Capital and reserves resulted from the change in the accounting policy regarding the recognition of
actuarial gains and losses of the Pension Fund, as explained in Note 21 of Section 3.
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Chart 18 EUR millions
OWN FUNDS
1.2. Developments in the profi t and loss account
The main components of the profi t and loss account from 2007 to 2011 are shown in the table below:
Table 3 EUR millions
2007 2008 2009 2010 2011 Δ 2011/2010
Interest margin 538 660 538 607 729 122
Interest income 1,078 1,403 826 1,149 1,614 465
Interest expense -540 -743 -288 -542 -885 -343
Realised gains/losses arising from fi nancial operations
-45 64 165 156 -70 -226
Unrealised losses on fi nancial assets and positions -41 -14 -6 -222 -18 204
Transfer from/to risk provisions 84 -173 -145 -163 -460 -297
Income from equity shares and participating interests
2 32 27 45 25 -20
Net result of pooling of monetary income 13 41 -56 35 -9 -45
Total administrative expenses -164 -163 -164 -175 -165 10
Staff costs -116 -117 -118 -121 -111 10
Supplies and services from third parties -36 -36 -36 -40 -37 3
Other administrative expenses -1 -1 -1 -1 -1 0
Depreciation -12 -10 -9 -14 -16 -2
Costs with banknote production -13 -15 -18 -13 -12 1
Other net profi t/loss 8 52 11 12 16 4
Income before taxes 382 484 353 283 37 -246
Income tax – current -100 -162 -52 -80 -201 -120
Income tax – deferred - 28 -46 -4 195 199
Net profi t for the year 282 349 254 198 31 -167
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Net profi t for the year 2011 stood at €31 million, declining by €167 million from 2010. It should be
noted that the fi gures for 2010 used for comparative purposes are the values reported in 2010, i.e. not
taking into account the restatement made due to the change in the accounting policy regarding the
recognition of actuarial gains and losses of the Pension Fund, described in greater detail in the Notes
on the fi nancial statements.
The change in Net profi t for the year was chiefl y due to the increase in provisions (€460 million, i.e. up by
nearly €300 million from 2010), aimed at addressing the increased risks inherent in the current juncture.
This increase in provisions, which are not deductible for tax purposes, led to a signifi cant rise in the value
of the income tax to be paid to the State, as described in Note 30 of Section 3. The impact on profi t of
this payment to the State was offset by an entry of equivalent value in deferred tax assets, as this tax
is expected to be recovered in the future. There was also a signifi cant reduction in realised gains/losses
arising from fi nancial operations, which however was more than offset by a rise in the interest margin
and a reduction in unrealised losses recognised at the end of the year.
Chart 19 EUR millions
INTEREST MARGIN
In 2011 the interest margin amounted to €729 million, increasing by 20% (€+122 million) from the
previous year (Chart 19). This rise, which was due to higher growth in interest bearing assets than in
interest bearing liabilities, had as main contributors yields on lending to credit institutions, income from
securities held for monetary policy purposes and interest relating to the assets item Adjustments to
circulation, all of them resulting from a rise both in the average balance of underlying capital, and in
the respective yields. In Income from securities held for monetary policy purposes, it should be noted
that, owing to the nature of these securities, this portfolio shows higher yields than the other remu-
nerated assets. The rise in Interest expense, on the liabilities side of the balance sheet, resulted in its
near entirety from the increase in interest relating to Intra-Eurosystem liabilities (TARGET) and to the
general government, both also justifi ed by increases in the average balances of these liabilities and in
the respective remuneration rates.
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Chart 20 EUR millions
NET RESULT OF FINANCIAL OPERATIONS, UNREALISED LOSSES AND RISK PROVISIONS
Realised gains/losses arising from fi nancial operations stood at €-70 million, decreasing sharply by
€226 million from 2010 (Chart 20). This reduction was chiefl y due to both realised losses arising from
transactions in securities denominated in euro (which in 2010 had posted signifi cant gains) and the
recognition of losses on interest rate futures.
Owing to developments in fi nancial markets, the decrease in realised gains/losses, in net terms, was partly
offset by the reduction in unrealised losses, from €222 million in 2010 to €18 million in 2011, almost
entirely due to the decrease of the securities revaluation differences. In accordance with the harmonised
accounting rules of the Eurosystem, these losses are recognised in losses for the year as at 31 December,
while unrealised losses continue to be recognised in the balance sheet in the respective items of the
Revaluation accounts. Pursuant to the provisions of the Chart of Accounts of Banco de Portugal (Plano
de Contas do Banco de Portugal – PCBP), these losses have been covered by the respective provisions
(see Notes 19 and 24 of Section 3. Notes on the fi nancial statements).
In this regard, the prudential criteria set out in the PCBP and the overall risk positions to which the Bank
is exposed were taken into consideration in year-end adjustments in provisions items. In addition to the
use made of the coverage for potential losses referred to above, provisions for exchange rate risk and
securities price risk were adjusted so as to provide adequate risk coverage. In 2011 reference should
be made to the setting up of a provision for credit risks, to cover the expected risks arising from the
various assets’ portfolios of the Bank. The provision set up in 2008 to cover risks that are shared with the
Eurosystem, arising from monetary policy operations, was reduced by the amount decided upon by the
Governing Council of the ECB for 2011, in view of positive developments in the execution of collateral
received as a guarantee for these operations.
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Chart 21 EUR millions
TOTAL ADMINISTRATIVE EXPENSES
In 2011 administrative expenses decreased by 6% from 2010 (€-10 million), standing at €165 million
(Chart 21). The main item of these expenses, i.e. Staff costs (accounting for 68% of the total), stood
at €111 million, representing a reduction of 8% from 2010, chiefl y refl ecting the effects of the
containment measures decided upon by the Board of Directors of Banco de Portugal at the beginning
of 2011. The salary containment measures implemented at the Bank concentrated on remuneration
components and other staff costs that are not legally and contractually binding, in order not to touch on
the salary components protected by the collective labour regulations to which the Bank is committed.
In turn, the Board of Directors decided to cut the remunerations of its members by 10% in 2011. The
measures adopted by the Board of Directors, within the scope of its decision-making autonomy in
human resources management, produced an effect equivalent to the objectives set out in the State
Budget Law for 2011.
Supplies and services from third parties (accounting for 22% of total administrative expenses) amounted
to €37 million, decreasing by 7% from 2010, in line with the Bank’s self-implemented cost-savings
programme, which was aimed at promoting an effi cient management of resources. To this end, specifi c
intervention areas were identifi ed and a number of solutions implemented yielding signifi cant savings
in costs. Under supplies and services from third parties, the items that generated higher savings were
travel and accommodation, communications, licensing and maintenance of software, conservation and
repair of IT equipment and infrastructures.
Depreciation amounted to €16 million, increasing by 12% from December 2010, due to the end in
2011 of large-value projects, resulting from investments made in previous years, mainly in IT and works
in buildings and premises.
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In 2011 income tax costs totalled €6 million, as a result of the combined effect of the recognition of
€201 million relating to current taxes (to be paid to the State) and of the recognition of €195 million
relating to costs with deferred taxes (see Note 30).
Lisbon, 6 March 2012
BOARD OF DIRECTORS
Governor
Carlos da Silva Costa
Vice-Governors
Pedro Miguel de Seabra Duarte Neves
José Joaquim Berberan e Santos Ramalho
Directors
José António da Silveira Godinho
João José Amaral Tomaz
Profi t distribution
In accordance with the provisions set forth in Article 53 (2) of the Organic Law of Banco de Portugal, the
net profi t for the year of 2011, to the amount of €31.17 million, was distributed as follows:
10% to the legal reserve ............................................................................................ €3,116,521.28
10% to other reserves ................................................................................................ €3,116,521.28
and, pursuant to subparagraph (c),
20% to other reserves ................................................................................................ €6,233,042.57
60% to the State, as dividends ................................................................................. €18,699,127.70
pursuant to Decision No 95/12 of 24 April 2012 of the Minister of State and Finance.
An estimated income tax amount of around €200.77 million will also be payable.
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2. FINANCIAL STATEMENTS
BALANCE SHEET OF BANCO DE PORTUGAL
ASSETSNote
number
31 Dec. 201131 Dec. 2010
Restated31 Dec. 2010
Grossassets
Accumulateddepreciation
andadjustments
Netassets
Netassets
Netassets
1. Gold and gold receivables 2 14,964,159 - 14,964,159 12,979,494 12,979,494
2. Claims on non-euro area residents denominated in foreign currency
1,524,468 - 1,524,468 2,731,742 2,731,742
2.1. Receivables from the IMF 3 1,262,970 - 1,262,970 1,231,685 1,231,685
2.2. Balances with banks and security investments, external loans and other external assets
4 261,497 - 261,497 1,500,058 1,500,058
3. Claims on euro area residents denominated in foreign currency
4 332,363 - 332,363 552,872 552,872
4. Claims on non-euro area residents denominated in euro
5 693,923 - 693,923 1,864,485 1,864,485
4.1. Balances with banks, security investments and loans 693,923 - 693,923 1,864,485 1,864,485
4.2. Claims arising from the credit facility under ERM II - - - - -
5. Lending to euro area credit institutions related to monetary policy operations denominated in euro
6 46,001,500 - 46,001,500 40,899,000 40,899,000
5.1. Main refi nancing operations 6,976,000 - 6,976,000 17,059,500 17,059,500
5.2. Longer-term refi nancing operations 39,025,500 - 39,025,500 22,974,500 22,974,500
5.3. Fine-tuning reverse operations - - - 840,000 840,000
5.4. Structural reverse operations - - - - -
5.5. Marginal lending facility - - - 25,000 25,000
5.6. Credits related to margin calls - - - - -
6. Other claims on euro area credit institutions denominated in euro
5 164 - 164 256 256
7. Securities of euro area residents denominated in euro
15,925,261 - 15,925,261 13,555,811 13,555,811
7.1. Securities held for monetary policy purposes 7 7,268,817 - 7,268,817 4,161,197 4,161,197
7.2. Other securities 5 8,656,444 - 8,656,444 9,394,614 9,394,614
9. Intra-Eurosystem claims 8 23,018,975 - 23,018,975 20,194,732 20,194,732
9.1. Participating interest in the ECB 172,760 - 172,760 143,586 143,586
9.2. Claims equivalent to the transfer of foreign reserves to the ECB
1,008,345 - 1,008,345 1,008,345 1,008,345
9.3. Net claims arising from balances of TARGET accounts - - - - -
9.4. Net claims related to the allocation of euro banknotes within the Eurosystem
21,820,552 - 21,820,552 19,042,801 19,042,801
9.5. Claims related to other operational requirements 17,319 - 17,319 - -
10. Items in the course of settlement 17 - 17 2,473 2,473
11. Other assets 7,575,273 267,737 7,307,536 6,817,805 6,968,817
11.1. Coins of the euro area 46 537 46,537 39,027 39,027
11.2. Tangible and intangible fi xed assets 9 316,600 193,535 123,065 113,070 113,070
11.3. Other fi nancial assets 10 6,144,941 - 6,144,941 5,943,509 5,943,509
11.4. Off-balance-sheet instruments revaluation differences - - - 365 365
11.5. Accruals and prepaid expenses 11 775,872 - 775,872 536,061 563,131
11.6. Sundry 12/19 291,323 74,201 217,121 185,775 309,716
Total depreciation - 193,535 - - -
Total adjustments - 74,201 - - -
Total assets 110,036,102 267,737 109,768,366 99 598,671 99,749,683
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EUR thousands
AS AT 31 DECEMBER 2011
LIABILITIESNote
number31 Dec. 2011
31 Dec. 2010Restated
31 Dec. 2010
1. Banknotes in circulation 13 20,451,773 19,376,124 19,376,124
2. Liabilities to euro area credit institutions related to monetary policy operations denominated in euro
14 5,691,371 4,921,469 4,921,469
2.1. Current accountsm 3,284,118 1,860,841 1,860,841
2.2. Deposit facility 2,406,403 3,050,628 3,050,628
2.3. Fixed-term deposits - - -
2.4. Fine-tuning reverse operations - - -
2.5. Deposits related to margin calls 850 10,000 10,000
3. Other liabilities to euro area credit institutions denominated in euro - - -
5. Liabilities to other euro area residents denominated in euro 15 4,869,372 1,035 1,035
5.1. General government 4,743,253 1,000 1,000
5.2. Other liabilities 126,119 35 35
6. Liabilities to non-euro area residents denominated in euro 16 336 252 252
7. Liabilities to euro area residents denominated in foreign currency
- - -
8. Liabilities to non-euro area residents denominated in foreign currency
- - -
8.1. Deposits, balances and other liabilities - - -
8.2. Liabilities arising from the credit facility under ERM II - - -
9. Counterpart of special drawing rights allocated by the IMF 3 957,046 933,255 933,255
10. Intra-Eurosystem liabilities 8 60,964,229 59,921,252 59,921,252
10.1. Liabilities related to promissory notes backing the issuance of ECB debt certifi cates
- - -
10.2. Net liabilities arising from balances of TARGET accounts 60,923,110 59,912,237 59,912,237
10.3. Net liabilities related to the allocation of euro banknotes within the Eurosystem
- - -
10.4. Other liabilities within the Eurosystem 41,120 9,015 9,015
11. Other liabilities 516,119 402,981 444,242
11.1. Off-balance-sheet instruments revaluation differences - - -
11.2. Accruals and income collected in advance 17 85,848 72,270 113,531
11.3. Sundry 18 430,270 330,712 330,712
12. Provisions 19 2,947,338 2,518,506 2,518,506
13. Revaluation accounts 20 12,061,292 10,054,557 10,054,557
14. Capital and reserves 21 1,278,324 1,259,726 1,380,618
14.1. Capital 1,000 1,000 1,000
14.2. Reserves 1,277,324 1,258,726 1,379,618
15. Profi t for the year 31,165 209,513 198,373
Total equity and liabilities 109,768,366 99,598,671 99,749,683
HEAD OF THE ACCOUNTING DEPARTMENT
José Pedro Silva Ferreira
Note: Totals/sub-totals included in the fi nancial statements and respective notes may not add up due to rounding, since fi gures are presented in EUR thousands.
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EUR thousands
PROFIT AND LOSS ACCOUNT
ITEMSNote
number31 Dec. 2011
31 Dec. 2010Restated
31 Dec. 2010
1. Interest income 1,614,143 1,148,914 1,148,914
2. Interest expense 885,158 541,752 541,752
3. Net interest income 22 728,985 607,162 607,162
4. Realised gains/losses arising from fi nancial operations 23 (69,627) 156,173 156,173
5. Unrealised losses on fi nancial assets and positions 24 18,353 221,978 221,978
6. Transfer from/to risk provisions 19 (459,764) (163,022) (163,022)
7. Net result of fi nancial operations, unrealised losses and risk provisions
(547,744) (228,827) (228,827)
8. Fees and commissions income 3,803 2,801 2,801
9. Fees and commissions expense 4,044 3,166 3,166
10. Net income from fees and commissions (241) (364) (364)
11. Income from equity shares and participating interests 25 25,459 45,003 45,003
12. Net result of pooling of monetary income 26 (9,179) 35,342 35,342
13. Other income 27 17,863 16,198 16,198
14. Total net income 215,143 474,513 474,513
15. Staff costs 28 111,484 120,644 120,644
16. Supplies and services from third parties 37,077 39,915 39,915
17. Other administrative expenses 674 544 544
18. Depreciation for the year 9 15,697 13,967 13,967
19. Total administrative expenses 164,932 175,071 175,071
19. Costs with banknote production 11,569 12,577 12,577
20. Other expenses 27 3,905 2,762 9,530
21. Losses for impairment of assets (losses/reversals) 29 (2,069) (5,312) (5,312)
22. Transfer to the reserve relating to capital gains on gold sales - - -
23. Total costs and losses (net) 178,336 185,098 191,865
24. Income tax 30 5,641 79,903 84,276
24.1. Income tax - current 200,768 80,427 80,427
24.2. Income tax - deferred (195,127) (525) 3,848
25. Profi t for the year 31,165 209,513 198,373
HEAD OF THE ACCOUNTING DEPARTMENT
José Pedro Silva Ferreira
Note: Totals/sub-totals included in the fi nancial statements and respective notes may not add up due to rounding, since fi gures are presented in EUR thousands.
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3. NOTES ON THE FINANCIAL STATEMENTS
(Figures in EUR thousands)
NOTE 1 | BASES OF PRESENTATION AND MAIN ACCOUNTING POLICIES
1.1. Bases of presentation
The fi nancial statements of Banco de Portugal have been prepared in accordance with the Chart of
Accounts of Banco de Portugal (Plano de Contas do Banco de Portugal – PCBP).
The bases for preparation of the fi nancial statements, as envisaged in the current PCBP, rely on two
major regulations: (i) Guideline of the ECB on the legal framework for accounting,52 which adopts the
mandatory rules applicable to the treatment of major central banking activities and the optional rules
recommended for participating interests; and (ii) technical guidance on the recognition and measurement
based on the IFRS53 for the remaining activities, which will be applied provided the following cumulative
conditions are ensured:
• The issue is not subject to the mandatory accounting rules of the ECB Accounting Guideline;
• The implementation of technical guidance does not collide with the spirit and conceptual rationale
of the ECB Accounting Guideline;
• The technical guidance does not collide with the legal provisions applicable to the Bank, in particular
its Organic Law;
• The technical guidance does not collide with specifi c provisions of the PCBP on specifi c issues;
and
• The issue does not collide with the central bank’s specifi c role.
Hence, taking the fulfi lment of these conditions into consideration, IFRS regulations on the following
subjects are applied to the Bank:
• Tangible and intangible assets: with regard to the recognition and measurement of its assets, the Bank
follows the technical guidance of IAS 16 - Property, Plant and Equipment and IAS 38 -Intangible Assets;
• Current and deferred taxes: with regard to the recognition and measurement of these taxes, the
Bank follows the technical guidance of IAS 12 - Income Taxes.
• Impairment of non-fi nancial assets: with regard to the recognition and measurement of impairment
of non-fi nancial assets, the Bank follows the technical guidance of IAS 36 - Impairment of Assets,
except for those assets that are compulsorily regulated by the ECB Accounting Guideline;
• Employee benefi ts: with regard to the recognition and measurement of employee benefi ts, including
lending to its employees, the Bank follows the technical guidance of IAS 19 - Employee Benefi ts; and
• Commitment to co-fi nancing interest rate subsidies in mortgage lending: with regard to the
recognition and measurement of this commitment, the Bank follows the technical guidance of IAS
37 - Provisions, Contingent Liabilities and Contingent Assets.
52 Guideline of the European Central Bank of 11 November 2010 on the legal framework for accounting and fi nancial reporting in the European System of Central Banks (ECB/2010/20).
53 IFRS: International Financial Reporting Standards.
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In accordance with the ECB Accounting Guideline, the classifi cation of assets and liabilities shall be made
according to the residence in the euro area criterion. Thus, domestic assets and liabilities are those relating
to euro area residents.
Participating interests in subsidiaries are recorded in the fi nancial statements, as described in Section 1.2. (i)
of this Note. Given the immaterial nature of the results of a possible consolidation process, the Bank does
not prepare consolidated fi nancial statements.
The Bank is an integral part of the European System of Central Banks (ESCB) being subject to the provisions
laid down in Article 27 (1) of the Statute of the European System of Central Banks and of the European
Central Bank (hereinafter the ‘Statute of the ESCB’), according to which the annual accounts of the national
central banks (NCBs) of the Eurosystem shall be audited by independent external auditors. In this context, the
bank follows the good practice of the Eurosystem, defi ned for the purpose of ensuring the independence
of the external auditors, being prohibited from hiring any other service from the same external auditor.
1.2. Synopsis of the main accounting policies
The main accounting policies and valuation criteria used in the preparation of fi nancial statements for the
year 2011 are the following:
a) Accrual basis of accounting
The Bank follows the accruals principle of accounting in relation to most fi nancial statement items, namely
with regard to interest on lending and deposit operations, which is recognised in the accounting period in
which it is generated and not according to the moment in time in which it is paid or received.
b) Recognition of gains and losses arising from fi nancial operations
Realised gains/losses arising from fi nancial operations are taken to the profi t and loss account on the settle-
ment date, except in the situations envisaged in the ‘economic approach’ alternative method, described
in the ECB accounting guideline, under which at the end of the year gains and losses arising from spot
transactions are recognised on the trade date.
In the course of the year, revaluation differences (difference between the market value and the weighted
average cost) are recorded in the balance sheet, in a specifi c revaluation account for each type of asset.
At the end of the fi scal year, negative revaluation differences are recognised in the Profi t and loss account
as Unrealised losses.
No netting is allowed on revaluation differences in any one security (ISIN) or in any currency.
c) Conversion of assets, liabilities, off-balance-sheet instruments and profi t and loss denominated
in foreign currency
Assets, liabilities and off-balance-sheet instruments denominated in foreign currency are converted into
euro at the exchange rate prevailing on the fi nancial statements date. The rate used in the conversion of
income and expenses denominated in foreign currency is the one prevailing on the date of the recognition
in the profi t and loss account.
d) Transactions denominated in foreign currency
The calculation of gains and losses denominated in foreign currency is made on a currency-by-currency
basis by reference to the respective weighted average cost, which is computed in accordance with the
‘daily net average cost’ procedure.
This method implies that, for a given asset position, the average exchange rate of each foreign currency
is changed only when the amount purchased on a given day is higher than the amount sold. Gains and
losses arising from sales are determined by the difference between the transaction value and the average
cost of the day.
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Where the amounts sold are higher than those purchased, the average cost of the day is determined by two
components: day purchases (at the transaction value) plus the differential between day sales and purchases
(at the historical weighted average cost). Where a liability position exists in respect of a foreign currency,
the average cost of the liability position shall be affected by net sales, recognising gains and losses arising
from the acquisitions.
Spot and forward foreign exchange transactions and currency swaps are recorded as follows:
• Foreign exchange spot transactions
– Spot purchases and sales of foreign currency are recorded on the settlement date, which is when
the weighted average cost of the currency position is affected, in compliance with the method
described above;
– Spot purchases of foreign currency against the sale of euro are recorded at the transaction’s
exchange rate;
– Cross-currency spots are recorded in euro through the use of the spot exchange rate of the trans-
action’s quote currency on the trade date;
– In spot sales of foreign currency against euro the transaction’s foreign exchange gains and losses
arise from the difference between the equivalent of the transaction in euro and the average cost
of the foreign currency sold;
– In cross-currency spots, the operation’s foreign exchange gains and losses arise from the difference
between the equivalent in euro of the transaction’s sold currency at the transaction’s exchange
rate and the equivalent in euro at the average cost of the foreign currency sold.
• Foreign exchange forward transactions
– These transactions are recognised in off-balance-sheet accounts from the trade date to the settle-
ment date at the spot rate prevailing on the trade date;
– Cross-currency forwards are recorded in euro through the use of the spot exchange rate of the
transaction’s currency on the trade date. The difference between the spot and the forward equiva-
lents is treated as interest payable/receivable on an accruals basis over the life of the transaction.
The weighted average cost of the currency position is affected 2 days after the trade date of the
transaction;
– In forward sales of foreign currency, foreign exchange gains and losses arise from the difference
between the equivalent in euro at the spot rate of the transaction’s quote currency and the equiva-
lent in euro at the weighted average cost of that currency, and are entered in the respective profi t
and loss account on the date on which the purchase affects the acquisition cost. The difference
between the spot and forward equivalents is treated as interest payable/receivable on an accruals
basis up to the settlement date of the transaction.
• Foreign exchange swaps
– Foreign exchange swaps involve the simultaneous spot purchase/sale of one currency against
another and the forward sale/purchase of the same amount of this currency against the other;
– Spot purchases/sales are treated as foreign exchange spot transactions (in balance sheet accounts);
forward purchases/sales are treated as forward foreign exchange transactions and recognised in
off-balance-sheet accounts from the trade date to the maturity date at the spot rate prevailing
on the former;
– The difference between the spot and forward rates is treated as interest payable/receivable on an
accruals basis over the life of the transaction;
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– The weighted average cost of each foreign currency position is not affected by the simultaneous
currency infl ows and outfl ows;
– There are no revaluation differences in foreign currency positions, since they are derived from the
spot and forward currency positions as a whole.
Foreign exchange transactions traded in one year, but whose settlement occurs in the subsequent year, are
an exception to this accounting treatment, as they are recognised in the year when the transaction was
traded, according to the ‘alternative approach’.
e) Gold
Gold is accounted at market price.
The accounting treatment of gold is similar to that of foreign currencies referred to in (d) above. In sum,
the average cost of the gold stock is only changed when the amount purchased on a given day is higher
than the amount sold. Gains and losses arising from sales are derived from the difference between the
transaction value and the weighted average cost.
The method for the recognition of gains and losses is also similar to that of foreign exchange transactions.
f) Securities held for monetary policy purposes
In 2011 the item Securities held for monetary policy purposes is comprised of two securities portfolios
held under the:
• Covered Bond Purchase Programme (CBPP 1)
On the basis of the decisions taken by the Governing Council of the ECB on 7 May and 4 June 2010,
which established a programme coordinated at Eurosystem level, Banco de Portugal has purchased,
for monetary policy purposes, covered bonds denominated in euro and issued in the euro area. No
further purchases are envisaged under this programme.
• Eurosystem’s Securities Markets Programme (SMP)
The decision taken by the Governing Council of the ECB on 14 May 2010 established a Securities
Markets Programme enabling the purchase of public debt securities with the aim of stabilising the
European securities market, under which Banco de Portugal has purchased government bonds issued
by euro area countries.
• Covered Bond Purchase Programme 2 - CBPP 2)
With similar goals to the fi rst Covered Bond Purchase Programme (CBPP 1), the Governing Council of the
ECB decided on 3 November 2011 to launch a new purchase programme for this type of bonds (CBPP
2), under which Banco de Portugal has purchased euro-denominated bonds issued in the euro area.
The securities held in these portfolios, classifi ed as held-to-maturity, are valued at amortised cost plus
the respective premium or amortised discount, being subject to impairment tests.
g) Securities for other than monetary policy purposes
Banco de Portugal holds in its portfolio marketable securities (trading portfolio) and securities held to
maturity (medium-term investment portfolio).
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• Trading portfolio
The portfolio of marketable securities is valued at market price.
The calculation and recognition of profi t and loss in marketable securities complies with the valuation
method of the weighted average cost for each type of security. According to this method, the acqui-
sition cost of the daily purchases is added to the weighted average cost of each type of security, so
that a new weighted average cost can be calculated. Sales are deducted from the stock by applying
the last weighted average cost. The difference between the value of sales and the weighted average
acquisition cost plus the corresponding premium or discount, by type of security, is treated as realised
gain or loss. In turn, the premium or discount amortised up to the sale is also treated as realised gain
or loss (interest).
Revaluation differences are measured by the difference between the weighted average cost of the
stock, plus the corresponding accrued premium or discount, and the respective market value, and
treated as referred to in (b) above.
• Medium-term investment portfolio
The portfolio of securities held to maturity, classifi ed as fi nancial fi xed assets (see Note 10), is valued at
the historical weighted average cost, calculated in a totally independent manner from the remaining
securities classifi ed as trading securities, and is subject to impairment tests. The accounting treatment
of interest, premiums and discounts of securities held in this portfolio is similar to that of the portfolio
of marketable securities.
h) Repos and reverse repos
Repos and reverse repos involve the lending or repurchase of funds, collateralised by securities temporarily
pledged or received as a guarantee.
Securities sold under a repurchase agreement remain on the Bank’s balance sheet and are treated as if they
had continued to be part of the portfolio from which they were sold. Liabilities for the amounts received
in repos are entered on the liabilities side of the Bank’s balance sheet, including interest, which is recorded
as cost on an accrual basis over the life of the transaction.
The lending of funds through reverse repos is recorded on the assets side of the Bank’s balance sheet,
being treated as a loan, and the interest is recognised on an accrual basis over the life of the transaction.
i) Participating interests
Participating interests of a long-standing nature, whose maintenance is of particular interest to the Bank’s
activity, are recorded in the fi nancial statements under Other fi nancial assets.
Participating interests in subsidiaries and associated companies are valued in accordance with the recom-
mendations of the ECB Accounting Guideline, through the Net Asset Value valuation method.54
The remaining participating interests are recorded according to the acquisition cost criterion less adjustments
when considered adequate.
54 Net Asset Value (NAV) is the value of assets less the value of the liabilities of participated entities, multiplied by the share held by Banco de Portugal in those entities.
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j) Banknotes in circulation
The ECB and the 17 NCBs of the EU Member States whose currency is the euro, which together comprise
the Eurosystem, have issued euro banknotes since 1 January 2002,55 with the exception of Banka
Slovenije, which adopted the euro on 1 January 2007, the Central Banks of Cyprus and Malta, which
adopted the euro on 1 January 2008, Národná banka Slovenska , which adopted the euro on 1 January
2009 and Eesti Pank, which adopted the euro on 1 January 2011. The total value of euro banknotes
in circulation is allocated on the last working day of each month in accordance with the ‘banknote
allocation key’.56
The ECB has been allocated a share of 8% of the total value of euro banknotes in circulation, whereas
the remaining 92% have been allocated to NCBs according to their weightings in the capital key of
the ECB. The share of euro banknotes allocated to each NCB is disclosed under the balance sheet item
Banknotes in circulation.
The difference between the value of euro banknotes allocated to each NCB in accordance with the
banknote allocation key and the value of the euro banknotes that it actually puts into circulation also
gives rise to remunerated intra-Eurosystem balances. These claims or liabilities, which incur interest,57
are disclosed under the sub-item Intra-Eurosystem: Net claim/liability related to the allocation of euro
banknotes within the Eurosystem (see Section 1.2. (k) of this Note).
When a Member State adopts the euro, those intra-Eurosystem balances referring to euro banknotes in
circulation are adjusted over a fi ve-year period so that changes in banknote circulation patterns do not
signifi cantly alter NCBs’ relative income positions. These adjustments are effected by taking into account
the differences between the average value of banknotes in circulation of each NCB in the reference
period and the average value of banknotes that would have been allocated to them during that period
under the ECB’s capital key. The adjustments of intra-Eurosystem balances will cease to apply as of the
fi rst day of the sixth year after the cash changeover of each new Eurosystem participant.
The interest income and expense on these balances is cleared through the account of the ECB and
disclosed under Net interest income.
The Governing Council of the ECB has decided that the seigniorage income of the ECB, which arises
from the 8% share of euro banknotes allocated to the ECB, shall be due to the NCBs in the same
fi nancial year it accrues and distributed on the second business day of the following year in the
form of an interim distribution of profi t.58 It shall be distributed in full unless the ECB’s net profi t for
the year is lower than its income earned on euro banknotes in circulation and subject to any deci-
sion by the Governing Council to reduce this income in respect of expenses incurred by the ECB in
connection with the issue and handling of euro banknotes. The Governing Council may also decide to
transfer all or part of the ECB’s seigniorage income to a provision for foreign exchange rate, interest
rate and gold price risks.
55 ECB Decision of 12 December 2008 (ECB/2008/26) amending Decision ECB/2001/15 on the issue of euro banknotes.56 ‘Banknote allocation key’ means the percentages that result from taking into account the ECB’s share in the total euro banknote issue
and applying the subscribed capital key to the NCBs’ share in that total.57 ECB Decision of 6 December 2001 on the allocation of monetary income of the national central banks of participating Member States
from the fi nancial year 2002 (ECB/2001/16), as amended by Decision of 14 December 2009 (ECB/2009/27).58 ECB Decision of 17 November 2005 on the distribution of the income of the European Central Bank on euro banknotes in circulation
to the national central banks of the participating Member States (ECB/2005/11), OJ L 311, 26.11.2005, p. 41-42.
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k) Intra-ESCB balances
Pursuant to Article 28 of the Statute of the ESCB, the NCBs are the sole subscribers to and holders of the
capital of the ECB. The subscription of capital shall be made according to the key established in Article 29.
Thus, Banco de Portugal’s share in the capital of the ECB and credits of the ECB relating to the transfer of
foreign reserve assets as envisaged in Article 30 result from applying the weightings referred to in Article
29 of the Statute of the ESCB.
Intra-Eurosystem balances arising from the allocation of euro banknotes are included as a net single asset
or liability under Net claims/liabilities related to the allocation of euro banknotes within the Eurosystem
(see Section 1.2. (j) Banknotes in circulation).
The balances of TARGET accounts represent the net position of Banco de Portugal vis-à-vis the ESCB,
against the net position of the ECB’s settlement account.
l) Provisions and adjustments
In accordance with Article 5 (2) of the Organic Law of Banco de Portugal, the Board of Directors may
establish other reserves and provisions to meet depreciation risks or losses to which certain types of assets
or operations are particularly exposed.
Adjustments to assets are recorded in the balance sheet and deducted from the book value of these
assets. The value of these adjustments results from the best estimate of losses associated with each class
of asset, on the basis of market values or, in their absence, expected market values.
The amounts of provisions for future contingency risks take into account not only the appropriate pruden-
tial management criteria, within the framework of central bank responsibilities, but also the degree of
volatility of the Bank’s main assets. Therefore, the following reference upper limits were established, as
set out in the PCBP:
• Provision for gold price risks: 30% of the gold value at market price;
• Provision for foreign exchange rate risks: 25% of the overall foreign exchange rate risk position;
• Provision for securities price risks: 5% of the securities value (denominated in euro and in foreign
currency) at market price;
• Provision for interest rate risks: 2% of the value of remunerated on-balance-sheet liabilities deno-
minated in euro.
In addition, total gains on gold sales are transferred on an annual basis to the reserve relating to these
gains, according to the provisions set forth in Article 53 (1) (b) of the Organic Law of Banco de Portugal,
wherefore no reference upper limit was established.
The PCBP also envisages the setting up of provisions for risks shared with euro area central banks as a
whole, in accordance with the decisions and within the limits established by the Governing Council of
the ECB.
The above provisions are tax deductible, provided that their accumulated balances do not exceed the
respective limits.
As regards provisions for non-performing loans, the Bank will adopt the system laid down in the Corporate
Income Tax Code (Código do Imposto sobre o Rendimento das Pessoas Colectivas – CIRC).
In 2011, the Bank set up a provision for credit risks of the assets portfolio. This provision is not deductible
for tax purposes.
m) Tangible and intangible fi xed assets and assets under construction
Tangible and intangible fi xed assets are valued at the acquisition cost less accumulated depreciation. This
cost includes expenditure directly attributable to the acquisition of goods.
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Depreciation is calculated on an annual basis, according to the constant quota method, by applying to
the historical cost the maximum annual rates allowed for tax purposes, which were deemed not to differ
substantially from their estimated useful life:
Number of years
Tangible assets
Buildings and other constructions 10 to 50
Premises 4 to 20
Equipment
Machinery and tools 4 to 8
Computer hardware 3 to 5
Transport equipment 4 to 8
Furniture and fi ttings 4 to 8
Computer software 3
Intangible assets 10
The depreciation of motor vehicles is made differently, depending on whether they are expected to be
sold after four years or to continue to be available for use by the Bank. Hence, the former are depre-
ciated at a rate of 13.75% over four years, considering a residual value of 45% at the end of this period,
and the latter at a rate of 10% over eight years, considering a residual value of 20% at the end of this
period.
Tangible and intangible assets under construction are valued at the total expenses already charged to
the Bank and transferred to fi xed assets when their effective use starts, and hence their depreciation.
Costs incurred in relation to the maintenance and repair of tangible and intangible fi xed assets are
recorded as costs for the year.
n) Liabilities related to retirement pensions and other benefi ts
Within the framework of the collective labour agreements in force for the banking sector, the Bank
undertook the commitment to pay until 31 December 2010 to its employees hired before 3 March 2009,
or to their dependents, who are covered by the defi ned-benefi t plans of the Pension Fund of Banco
de Portugal, retirement pensions to employees who have reached the statutory age limit, are disabled
or have negotiated early retirement, as well as survivors pensions, supplementary benefi ts and death
grants. Besides, the Bank is also responsible for the settlement of pensions’ inherent charges (specifi cally,
contributions to SAMS (social health assistance service for banking sector employees)).
Decree-Law No 1-A/2011 of 3 January, laid down that from 1 January 2011, the active employees of the
Bank, enrolled in CAFEB (family allowance fund of bank employees) who were covered by the Pension
Fund – defi ned benefi t plan, will be covered by the general social security scheme when they reach the
statutory retirement age.
However, the Pension Fund retains responsibility for death grants and disability payments, as well as for
the payment of the supplement resulting from the difference between benefi ts calculated under the
general social security scheme and the benefi ts defi ned in the respective Pension Plans, which are based
on the collective labour agreements applicable and on the internal regulations of the Bank.
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The Bank’s liabilities related to retirement pensions and other benefi ts are calculated on an annual
basis, on the cut-off date for the accounts, by Sociedade Gestora do Fundo de Pensões do Banco de
Portugal – SGFP (Pension Fund Managing Company of Banco de Portugal), using the Projected Unit
Credit Method. The main actuarial assumptions (both fi nancial and demographic) used in the calculation
of these liabilities are presented in Note 32.
The recognition of costs and liabilities related to retirement pensions is made in accordance with IAS 19.
According to the provisions laid down therein, the amount recorded in Staff costs refers to the current
service cost and to interest costs less the expected income from the Pension Fund’s assets.
Actuarial gains and losses arise from (i) differences between actuarial and fi nancial assumptions used
and the values actually recorded, and from (ii) changes introduced in actuarial and fi nancial assumptions
as well as in the general conditions of pension plans.
In 2011 the Bank changed its accounting policy regarding the recognition of actuarial gains and losses.
These are no longer recognised according to the so-called ‘corridor approach’, being directly recorded
under Retained earnings.
Contributions to the Pension Fund are made on an annual basis, in order to ensure its solvency, and the
minimum funding of pension liabilities is 100%, while that of past service liabilities of active employees
is 95%.
Pursuant to Decree-Law No 54/2009 of 2 March, the employees who have started working at the Bank
after 3 March 2009 are covered by the general social security scheme. Nonetheless, these employees
may opt for a supplementary pension plan, for which Banco de Portugal contributes with 1.5% of the
actual monthly compensation. However, since this is a defi ned contribution plan, the Bank has no legal
or constructive obligation to pay any additional contribution if the pension fund does not hold adequate
assets to pay all benefi ts to the employees regarding their service in the current or previous periods.
o) Seniority bonuses
Banco de Portugal recognises on the liabilities side of its balance sheet the current value of liabilities for
years of service, regarding seniority bonuses.
The SGFP calculates the current value of benefi ts with seniority bonuses on an annual basis, on the
cut-off date for the accounts, using the Projected Unit Credit Method. The main actuarial assumptions
(both fi nancial and demographic) used in the calculation of the current value of these benefi ts are
presented in Note 32.
On an annual basis, Banco de Portugal recognises directly under Profi t and loss for the year the current
service cost, of interest and net actuarial gains and losses, arising from changes in assumptions or in
the conditions of benefi ts.
p) Income tax
Charges with the income tax are calculated in accordance with the provisions laid down in the Corporate
Income Tax Code and the tax incentives and benefi ts applicable to the Bank.
Deferred tax assets and liabilities correspond to the value of the tax to be recovered and paid in future
periods, arising from temporary differences between the accounting values of assets and liabilities and
their tax base.
Current and deferred taxes are recognised under profi t and loss.
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q) Derivative fi nancial instruments
Derivative fi nancial instruments are revalued at their market value or, in its absence, at the estimated
market value. Revaluation differences are treated as described in Section 1.2. (b) of this Note, on an
item-by-item basis.
NOTE 2 | GOLD AND GOLD RECEIVABLES
31 Dec. 2011 31 Dec. 2010
Fine ounces (*) EUR thousands Fine ounces (*) EUR thousands
Gold stored at the Bank 5,549,398 6,752,863 5,550,049 5,857,622
Gold sight accounts 6,747,916 8,211,296 6,747,916 7,121,872
Gold reserve 12,297,314 14,964,159 12,297,966 12,979,494
(*) 1 ounce of fi ne gold corresponds to 31.103481 grams of fi ne gold.
As at 31 December 2011 the value of gold recorded an increase of €1,984,665 thousand compared with
the end balance in 2010. This resulted only from positive developments in the price of gold denominated
in euro, as the slight negative change in volume had a virtually nil impact on total reserves.
On 31 December 2011 the Bank’s gold reserve was valued at the market price of €1,216.86 per ounce of
fi ne gold, which corresponds to a 15% price rise from €1,055.42 on 31 December 2010. The signifi cant
increase in this price was due both to a rise in the price of the ounce of fi ne gold denominated in US
dollars, from USD 1,410 on 31 December 2010 to USD 1,574.5 on 31 December 2011 and to the effect
of the euro depreciation against the US dollar (3.2%) between these two dates.
Given the volatility of the price of gold in international markets, the Bank has set up a provision for gold
price risks within the limits defi ned in Section 1.2. (l) of Note 1, which is included in Provisions on the
liability side of the balance sheet (see Note 19).
NOTE 3 | LENDING AND DEPOSIT OPERATIONS WITH THE INTERNATIONAL MONETARY FUND (IMF)
31 Dec. 2011 31 Dec. 2010
IMF quota 1,221,945 1,003,755
IMF’s holdings (975,470) (810,404)
Reserve tranche position in the IMF 246,475 193,351
SDR holdings 940,547 964,273
Other claims on the IMF 75,949 74,061
Claims on the IMF 1,262,970 1 231,685
Counterpart of special drawing rights allocated by the IMF (957,046) (933,255)
Liabilities to the IMF (957,046) (933,255)
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The reserve tranche position in the IMF refl ects the equivalent in euro of Portugal’s quota in the IMF,
corresponding to the initial participation and subsequent payments less IMF’s holdings with Banco de
Portugal. On 18 March 2011 there was an increase in the Bank’s quota in the IMF, from SDR 867,400,000
on 31 December 2010 to SDR 1,029,700,000. This increase was made through a rise in the value of the
promissory note signed by the Bank, to the amount of SDR 121,725,000, and use of the SDR holdings
to the amount of SDR 40,575,000.
Claims on the IMF also include: (i) SDRs relating to the equivalent in euro of the SDR holdings assigned
to Banco de Portugal (to the amount of SDR 793 million) (2010: SDR 833 million) and (ii) Other claims
on the IMF relating to the borrowing agreement signed with the IMF under a decision of the Euro-
pean Council, according to which EU Member States should provide the IMF with a total amount of
€75 billion, allocated according to each country’s quota in the IMF. Portugal is responsible for a total
amount of € 1.06 billion, under the form of a credit line (see Note 31), materialised through drawings
made in 2009 and 2010.
The liability position corresponds to the item Counterpart of special drawing rights allocated by the IMF,
which shows a SDR 806 million liability to the IMF.
In addition to the above operations, the changes in the different claims and liabilities items also include
the effect of the SDR appreciation against the euro, compared with 31 December 2010 (2.5%).
NOTE 4 | BALANCES WITH BANKS AND SECURITY INVESTMENTS, LOANS AND OTHER ASSETS
DENOMINATED IN FOREIGN CURRENCY
31 Dec. 2011 31 Dec. 2010
Claims on non-euro-area residents denominated in foreign currency
Securities 260,112 1,283,159
Balances with banks, deposits and other money markets 1,385 216,899
261,497 1,500,058
Claims on euro area residents denominated in foreign currency
Securities 316,885 143,124
Balances with banks, deposits and other money markets 15,477 409,748
332,363 552,872
Total security investments denominated in foreign currency 576,997 1,426,282
Total balances with banks, deposits and other money
markets in foreign currency16,863 626,647
593,860 2,052,929
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In the year under review reference should be made to a marked reduction of the trading portfolio of
claims denominated in foreign currency. This decrease, arising from strategic investment options of the
Bank, was seen across the several foreign currency items. Worth noting among these, due to its material
nature, was the reduction in the securities portfolio, which on 31 December 2011 had the following
composition:
31 Dec. 2011 31 Dec. 2010
Securities of non-euro area residents denominated in foreign currency
Bonds 195,296 1,226,360
Other securities 64,816 56,799
260,112 1,283,159
Securities of euro area residents denominated in foreign currency
Floating rate notes 152,889 74,766
Other securities 163,996 68,357
316,885 143,124
576,997 1,426,282
Other external and internal assets denominated in foreign currency refer almost entirely to term deposits.
NOTE 5 | BALANCES WITH BANKS AND SECURITY INVESTMENTS, LOANS AND OTHER ASSETS
DENOMINATED IN EURO
31 Dec. 2011 31 Dec. 2010
Claims on non-euro area residents denominated in euro
Securities 388,331 440,206
Balances with banks, deposits and other money markets 305,592 1,424,278
693,923 1,864,485
Claims on euro area residents denominated in euro
Securities 8,656,444 9,394,614
Balances with banks, deposits and other money markets 164 256
8,656,607 9,394,870
Total security investments denominated in euro 9,044,775 9,834,820
Total balances with banks, deposits and other money markets denominated in euro
305,756 1,424,535
9,350,531 11,259,355
The volume of the trading portfolio denominated in euro recorded a signifi cant reduction compared
with December 2010, stress being laid on the fact that, at the level of the composition by fi nancial
instrument and residence, this reduction was more signifi cant in balances with banks, loans and other
assets of non-euro area residents.
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Securities denominated in euro are broken down as follows:
31 Dec. 2011 31 Dec. 2010
Securities of non-euro area residents denominated in euro
Floating rate notes 44,972 84,195
Bonds - 143,262
Other securities 343,359 212,749
388,331 440,206
Securities of euro area residents denominated in euro
Treasury bills 4,171,833 111,383
Bonds 3,609,567 8,597,183
Floating rate notes 4,960 350
Mortgage bonds 43,443 118,556
Other securities 826,639 567,143
8,656,444 9,394,614
9,044,775 9,834,820
NOTE 6 | LENDING TO EURO AREA CREDIT INSTITUTIONS RELATED TO MONETARY POLICY
OPERATIONS DENOMINATED IN EURO
The value of refi nancing operations to euro area credit institutions related to monetary policy opera-
tions denominated in euro at Eurosystem level stands at €866,927 million (2010: €551,787 million), of
which Banco de Portugal holds €46,001,500 thousand (2010: €40,899,000 thousand). In accordance
with Article 32.4 of the Statute of the ESCB, any risks from monetary policy operations, if they were to
materialise, should eventually be shared in full by all Eurosystem NCBs, in proportion to the prevailing
ECB capital key shares.
The main refi nancing operations (MROs) are liquidity-providing reverse transactions with a weekly
frequency and a maturity of normally one week. On 31 December 2011 the total amount placed by Banco
de Portugal, through fi xed rate tender procedures (MROs) with full allotment, amounted to €6,976,000
thousand (2010: €17,059,500 thousand).
The longer-term refi nancing operations (LTROs) are liquidity-providing reverse transactions generally
with a maturity of one, three, six or twelve months and the non-standard operations mentioned in the
following paragraph. On 31 December 2011 the total amount placed by Banco de Portugal stood at
€39,025,500 thousand (2010: €22,974,500 thousand), with a fi xed or fl oating rate, with reference to
the prevailing MROs rates.
On 8 December 2011 the Governing Council of the ECB, within the scope of its additional measures to
support bank lending and liquidity in the euro area money market, decided to conduct two LTROs with
a three-year maturity, with the option of early repayment after one year. The fi rst three-year LTRO was
conducted on 22 December 2011, and the ECB also allowed credit institutions that had participated in
the LTRO conducted on 27 October to make use of the possibility to shift the respective funds to this
new three-year operation.
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NOTE 7 | SECURITIES HELD FOR MONETARY POLICY PURPOSES
31 Dec. 2011 31 Dec. 2010
Securities held for monetary policy purposes
Covered Bond Purchase Programme 1 (CBPP 1) 1,319,246 1,388,037
Securities Markets Programme of the Eurosystem (SMP) 5,858,589 2,773,160
Covered Bond Purchase Programme 2 (CBPP 2) 90,982 -
7,268,817 4,161,197
On 31 December 2011 Securities held for monetary policy purposes contains securities acquired by
Banco de Portugal within the scope of the purchase programmes for covered bonds,59 and public
debt securities acquired within the scope of the Securities Markets Programme60 (see Section 1.2. (f)
of Note 1).
The total Eurosystem NCB’s holding of SMP securities valued at amortised cost amounts to
€194,155 million, of which Banco de Portugal holds €5,858,589 thousand. In accordance with Article
32.4 of the Statute of the ESCB, any risks from holdings of SMP securities, if they were to materialise,
should eventually be shared in full by the Eurosystem NCBs, in proportion to the prevailing ECB capital
key shares.
As referred to in Section 1.2. (f) of Note 1, at the end of the year impairment tests were conducted
on the securities held for monetary policy purposes, on the basis of the information available and esti-
mated recoverable amounts as at 31 December 2011. Part of the holdings under the SMP comprises
debt securities issued by the Hellenic Republic. As at 31 December 2011, the Governing Council of the
ECB considered that there was no evidence to assume that the announced restructuring of the Greek
debt would affect the portfolios held by the Eurosystem NCBs, which was confi rmed (see Note 34), and
therefore no impairment losses were recorded in respect of these securities at year-end.
Furthermore, there was no evidence to assume impairment in respect of the other securities
purchased under the SMP or the securities bought under the two Covered Bond Purchase Programmes
(CBPP 1 and 2).
NOTE 8 | INTRA-EUROSYSTEM CLAIMS AND LIABILITIES
Participating interest in the ECB
Pursuant to Article 28 of the Statute of the ESCB, the NCBs of the Eurosystem are the sole subscribers to
and holders of the capital of the ECB. The subscription of capital shall be according to the key established
in accordance with Article 29, and specifi cally with its paragraph 3 under which the weightings assigned
to the NCBs shall be adjusted every fi ve years after the establishment of the ESCB.61
59 ECB Decision of 2 July 2009 on the implementation of the covered bond purchase programme (ECB/2009/16) and ECB Decision of 3 November 2011 on the implementation of the second covered bond purchase programme (ECB/2011/17).
60 ECB Decision of 14 May 2010 establishing a securities markets programme within the framework of the Eurosystem (ECB/2010/5).61 The capital key is also adjusted as a result of the accession of new Member States to the European Union (EU).
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In accordance with the legal acts adopted on 29 December 2010 by the Governing Council of the ECB
on the increase in the ECB’s subscribed capital and pursuant to which the NCBs’ additional capital contri-
butions would be paid in three instalments, Banco de Portugal in 2011 made an additional contribution
of €29,173 thousand, corresponding to the payment of the second instalment of this capital increase.
According to Banco de Portugal’s share in the subscribed capital of the ECB – 1.7504% since 1 January
2009 – this share increased from €143,586 thousand on 31 December 2010 to €172,760 thousand on
31 December 2011.
On 1 January 2011, as a consequence of Estonia’s adoption of the euro, the share of Banco de Portugal
in the ECB adjusted capital decreased from 2.50804% on 31 December 2010 to 2.50163% on 1 January
2011.
Claims equivalent to the transfer of foreign reserves
This item represents claims arising from the transfer of foreign reserve assets from participating NCBs
to the ECB. These claims are denominated in euro at a value fi xed at the time of their transfer and are
remunerated on a daily basis at the latest available marginal rate for the Eurosystem’s MROs.
As a result of the adjustments in the share that NCBs hold in the subscribed capital of the ECB and due
to the entrance of new NCBs into the Eurosystem, claims arising from the transfer of foreign reserve
assets from participating NCBs to the ECB have also been adjusted, in accordance with the provisions
of Article 30.3 of the Statute of the ESCB.
Since 1 January 2009 the overall claims of foreign reserve assets of all participating NCBs have stood at
€40,204 million, corresponding, according to their share, to claims on Banco de Portugal to the amount
of €1,008,345 thousand.
Net claims related to the allocation of euro banknotes within the Eurosystem
The item Net claims related to the allocation of euro banknotes within the Eurosystem consists of the
claims of Banco de Portugal relating to the allocation of euro banknotes within the Eurosystem (see
Sections 1.2. (j) and 1.2. (k) of Note 1). From 1 January 2011, as a consequence of Estonia’s adoption of
the single currency, Banco de Portugal’s share in the banknote allocation key decreased from 2.3075%
on 31 December 2010 to 2.3015% on 1 January 2011.
Claims related to other operational requirements
On 31 December 2011 Claims related to other operational requirements consisted of: (i) claims of Banco
de Portugal to the amount of €16,311 thousand relating to interest accrual regarding the allocation
of euro banknotes within the Eurosystem in 2011, returned to Banco de Portugal on 3 January 2011
(see Note 25) and (ii) to the amount of €1,009 thousand relating to adjustments resulting from the
calculation method of the monetary income of past years, settled on 31 January 2012 (see Note 26).
Net liabilities arising from balances of TARGET accounts
On 31 December 2011, Liabilities arising from balances of TARGET accounts (see Section 1.2. (k) of Note
1) showed a credit position of €60,923,110 thousand, comprising all TARGET balances (31 December
2010: €59,912,237 thousand).
Liabilities related to other operational requirements
On 31 December 2011, Liabilities related to other operational requirements within the Eurosystem
corresponded to the result of the calculation method applied to 2011 monetary income to the amount
of €41,120 thousand (see Note 26), settled on 31 January 2012.
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NOTE 9 | TANGIBLE AND INTANGIBLE FIXED ASSETS
31 Dec. 2011 31 Dec. 2010
Tangible fi xed assets
Land 8,895 8,895
Buildings and other constructions 80,154 79,638
Premises 59,794 58,845
Equipment 82,636 78,419
Museum and art collections 8,764 8,520
240,243 234,317
Intangible fi xed assets
Computer software 34,633 28,318
Tangible and intangible fi xed assets under construction 41,724 28,305
Total gross tangible and intangible fi xed assets 316,600 290,940
Accumulated depreciation
Depreciation of tangible fi xed assets (166,821) (157,503)
Depreciation of intangible fi xed assets (26,714) (20,367)
(193,535) (177,870)
Total net tangible and intangible fi xed assets 123,065 113,070
In 2010 and 2011 the movements in this item were as follows:
31 Dec. 2009Net balance
Additions DisposalsDepreciationfor the year
31 Dec. 2010Net balance
Tangible fi xed assets
Land 8,901 - 6 - 8,895
Buildings and other constructions 42,675 76 35 2,536 40,179
Premises 9548 182 11 1937 7,781
Equipment 8,773 8,191 457 5,069 11,438
Museum and art collections 8,329 281 90 - 8,520
78,227 8,729 599 9,543 76,814
Intangible fi xed assets
Computer software 1,016 11,360 - 4,424 7,951
Tangible and intangible fi xed assets under construction
Fixed assets under construction -
projects 22,645 13,399 10,642 - 25,401
Advances - 3584 680 - 2,904
22,645 16,983 11,322 - 28,305
101,887 37,072 11,922 13,967 113,070
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31 Dec. 2010Net balance
Additions DisposalsDepreciationfor theyear
31 Dec. 2011Net balance
Tangible fi xed assets
Land 8,895 - - - 8,895
Buildings and other constructions 40,179 516 - 2,516 38,179
Premises 7,781 949 - 1,734 6,995
Equipment 11,438 4,331 83 5,098 10,588
Museum and art collections 8,520 356 112 - 8,764
76,814 6,153 196 9,349 73,421
Intangible fi xed assets
Computer software 7,951 6,315 - 6,347 7,919
Tangible and intangible fi xed assets under construction
Fixed assets under construction -
projects25,401 22,825 7,476 - 40,750
Advances 2,904 77 2,007 - 974
28,305 22,902 9,483 - 41,724
113,070 35,370 9,679 15,697 123,065
The item Tangible and intangible fi xed assets under construction on 31 December 2011 refers chiefl y
to projects under way related to Information Systems and Technology and works in the Bank’s buildings
and premises.
NOTE 10 | OTHER FINANCIAL ASSETS
31 Dec. 2011 31 Dec. 2010
Participating interest in non-euro area resident entities
In the Bank for International Settlements 21,650 21,650
Participating interest in euro area resident entities
In Finangeste 36,408 32,969
In SGFP of Banco de Portugal 2,580 2,423
in Valora 17,601 16,001
in Swift 42 42
Medium/long-term fi nancial investments 6,066,660 5,870,424
6,144,941 5,943,509
Adjustments of participating interests - -
6,144,941 5,943,509
Changes in the value of participating interests result chiefl y from the use of the Net Asset Value valu-
ation method, in which the valuation differences are directly recognised in profi t or loss for the year
(see Note 27).
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Within the scope of the Banco de Portugal’s own fund management, the medium to long-term investment
portfolio, given its characteristics (investments held to maturity) is included in Other fi nancial assets.
Compared to 31 December 2010 this portfolio increased slightly by €196,236 thousand.
The breakdown of this investment portfolio by type of fi nancial instrument is as follows:
31 Dec. 2011 31 Dec. 2010
Securities denominated in euro
Government debt bonds 5,601,690 5,370,491
Mortgage bonds 248,824 448,335
Other 216,146 51,597
6,066,660 5,870,424
NOTE 11 | ACCRUALS AND PREPAID EXPENSES
31 Dec. 201131 Dec. 2010
Restated31 Dec. 2010
Reported
Accruals
Interest and other income receivable from central
bank operations430,230 432,714 432,714
Prepaid expenses
Prepaid expenses from central bank operations 44,566 59,357 59,357
Other prepaid expenses 18,310 18,165 45,235
Deferred tax assets 282,767 25,825 25,825
345,643 103,347 130,417
775,872 536,061 563,131
On 31 December 2011 accruals relating to Income receivable from central bank operations include
essentially accrued interest on: (i) securities held for monetary policy purposes, (ii) securities, loans and
other assets of portfolios denominated in foreign currency and euro, and (iii) net claims/liabilities related
to the allocation of euro banknotes within the Eurosystem, as referred to in Section 1.2. (k) of Note 1.
Prepaid expenses from central bank operations essentially refer to interest accrued up to the purchase date
of coupon bearing securities of the different Bank portfolios (trading, medium and long-term investment,
and securities held for monetary policy purposes) which were paid to the counterparty upon purchase
and which will be received by the Bank on the maturity date of the respective coupon or upon the sale
of the securities, if it occurs prior to the maturity date.
The amount registered in Other prepaid expenses on 31 December 2011 includes, inter alia,
€14,859 thousand relating to the recognition, at market value, of Bank lending to its employees
(2010: €15,207 thousand). The reduction from the previous year results chiefl y from the fact that
in 2010 this item recognised prepaid expenses related to actuarial losses of the Pension Fund
(€27,070 thousand), pursuant to the accounting rules adopted as at that date, which were changed in
2011, as described in Note 32.
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The value recorded in deferred tax assets mainly stems from: (i) the provision set up in 2011 to cover
credit risks of assets (€195,750 thousand); (ii) future tax benefi ts relating to the amount of net actuarial
losses of the Pension Fund, recognised under Retained earnings due to the change in the respective
accounting policy (see Note 32) (deferred tax assets amounting to €61,825 thousand); (iii) the adjustment
of credit to Finangeste (deferred tax assets amounting to €21,516 thousand) and (iv) liabilities related
to the payment to employees of seniority bonuses (€3,643 thousand). The amount entered in this item
is described in detail in Note 30 – Income tax.
NOTE 12 | OTHER ASSETS - SUNDRY
31 Dec. 201131 Dec. 2010
Restated31 Dec. 2010
Reported
Lending to employees 127,658 122,418 122,418
Special credit situations 74,201 76,270 76,270
Values in the ‘corridor’ (Pension Fund) - - 123,942
Corporate Income Tax - payments on account 67,848 47,919 47,919
Sundry debtors 7,371 3,715 3,715
Pension Fund – Defi ned benefi t plan – Reserve account 4,873 4,923 4,923
Other central bank claims 5,543 3,477 3,477
Other reduced value accounts 3,828 3,323 3,323
291,323 262,045 385,986
Adjustments of special credit situations (74,201) (76,270) (76,270)
217,121 185,775 309,716
Lending to employees corresponds mostly to mortgage loans to employees.
The value entered in Special credit situations refers mostly to receivables from Finangeste under the
Banco de Portugal/Finangeste Arrangement of 9 January 1995, to the amount of €73,858 thousand
(2010: €75,926 thousand).
Values in the” corridor” relating to pensions in 2011 posted a nil value, due to the change in the accoun-
ting policy regarding the recognition of actuarial gains and losses, as presented in Note 32. The value
recognised in December 2010 (reported) refl ects part of the net cumulative actuarial gains and losses
up to that fi scal year, in compliance with the accounting policies followed until then.
Corporate Income Tax – payments on account comply with the provisions of Articles 96 to 98 of the
Corporate Income Tax Code.
The value recognised in Pension Funds - Defi ned benefi t plan – Reserve account refl ects the value of
the units of participation of this Fund earmarked for the Bank on 31 December 2011, at market value
(see Note 32).
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NOTE 13 | BANKNOTES IN CIRCULATION
Euro banknotes in circulation on 31 December 2011 consist of the Banco de Portugal’s share in total
euro banknotes in circulation in the Eurosystem (see Section 1.2. (j) of Note 1).
31 Dec. 2011 31 Dec. 2010
Banknotes in circulation
Banknotes put into circulation (net) (1,368,778) 333,323
Adjustments to circulation in the Eurosystem 21,820,552 19,042,801
20,451,773 19,376,124
In December 2011, the net value of banknotes put into circulation represented an asset, as the amount
of banknotes withdrawn from circulation is higher than the amount of liabilities related to their issue
(banknotes put into circulation).
NOTE 14 | LIABILITIES TO EURO AREA CREDIT INSTITUTIONS
The balance on Liabilities to euro area credit institutions related to monetary policy operations denomi-
nated in euro on 31 December 2011 refl ects chiefl y current accounts of credit institutions with Banco
de Portugal (€3,284,118 thousand) and the balance on deposit facility operations outstanding on this
date (€2,406,403 thousand).
Current accounts of credit institutions with Banco de Portugal serve a two-fold purpose: they are current/
settlement accounts and accounts where funds are deposited for compliance with minimum reserve
requirements, which are remunerated at the marginal rate for the Eurosystem’s MROs.
NOTE 15 | LIABILITIES TO OTHER EURO AREA RESIDENTS DENOMINATED IN EURO
The sub-item General government showed in 2011 a sharp increase from the previous year, due to the
operationalisation by the Bank of the Economic and Financial Assistance Programme to Portugal. Therefore,
this item in addition to the balance on the current account of the Directorate-General of the Treasury
now includes the value of the current accounts of the Portuguese Treasury and Government Debt Agency
(IGCP) relating to loan disbursements from the European Union and the International Monetary Fund
(EFSM - European Loan Facility Agreement, EFSF - European Financial Stability Facility, EFF - Extended
Fund Facility and BSSF - Bank Solvency Support Facility) unused so far. Within the framework of this
programme, a protocol was signed between Banco de Portugal and IGCP, establishing all the rules and
procedures to guarantee the principle of neutrality, so that the Bank will have no gains or losses with
the fi nancial assistance to the Portuguese Republic.
The sub-item Other liabilities includes the balances on current accounts with the Bank of guarantee
funds and other fi nancial intermediaries and fi nancial auxiliaries.
NOTE 16 | LIABILITIES TO NON-EURO AREA RESIDENTS DENOMINATED IN EURO
The balance on the item Liabilities to non-euro area residents denominated in euro on 31 December
2011 corresponds to the balances of current accounts of international organisations (excluding the IMF)
and several central banks.
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NOTE 17 | ACCRUALS AND INCOME COLLECTED IN ADVANCE
31 Dec. 201131 Dec. 2010
Restated31 Dec. 2010
Reported
Income collected in advance
Other income collected in advance 1 1 1
Deferred tax liabilities 376 388 41,649
378 388 41,649
Accruals
Accruals from central bank operations 68,037 55,806 55,806
Other accruals 17,434 16,075 16,075
85,471 71,881 71,881
85,848 72,270 113,531
The value of deferred tax liabilities, recognised in December 2010 (reported), is almost fully related to
assets without tax base recognised in the balance sheet relating to Banco de Portugal’s Pension Fund.
With the change in the accounting policy regarding the recognition of actuarial gains and losses relating
to the Pension Fund this amount was reversed (see Notes 30 and 32).
In Accruals from central bank operations stress should be laid on the contributions from: (i) the
accrued remuneration of the December 2011 intra-ESCB balance relating to TARGET, to the amount of
€59,547 thousand (2010: €51,476 thousand), (ii) accrued interest to be paid regarding the remunera-
tion of the Portuguese Treasury and Government Debt Agency (IGCP) current accounts, arising from
the operationalisation of the Economic and Financial Assistance Programme to Portugal, as described in
Note 15 (€5,194 million), and (iii) from the remuneration of minimum reserves since 14 December 2011,
to the amount of €2,704 thousand (2010: as from 8 December, €3,454 thousand).
NOTE 18 | OTHER LIABILITIES – SUNDRY
31 Dec. 2011 31 Dec. 2010
Banknotes withdrawn from circulation 174,153 183,547
Third parties 14,108 15,006
Liabilities relating to the payment to employees of seniority bonuses 12,561 12,077
Liabilities relating to the Pension Fund 21,867 8,730
Estimate for income taxes 200,768 80,427
Other central bank liabilities 5,543 27,462
Other liabilities to be settled 3 2467
Other accounts of reduced individual value 1,267 996
430,270 330,712
Banknotes withdrawn from circulation represents the Bank’s liability to the holders of banknotes deno-
minated in Portuguese escudos (legacy currency), as long as these can be exchanged. The reduction
from 31 December 2010 is due to the end of the exchange period of the 1,000 escudo banknote, effi gy
D. Pedro V.
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Liabilities relating to the payment to employees of seniority bonuses as at 31 December 2011 refl ects
the value of liabilities for years of service, computed through the actuarial calculation carried out by
SGFP. Actuarial gains and losses associated with these liabilities calculated at the end of the period under
review are recorded in Other income and losses (Note 32).
The balance of €21,867 thousand in Liabilities relating to the Pension Fund represents the defi cit of this
Fund as at 31 December 2011, and results from the fact that, on that date, the fi nancing level of the
Fund was below 100% (see Note 32).
The balance of Other central bank liabilities refl ects the Bank’s liabilities related to values received under
pledge agreements. The signifi cant reduction in this item compared with 31 December 2010 results from
the fact that, on that date, the Bank recognised in its accounts the amounts delivered to it within the
scope of the implementation of the exceptional regime of tax settlement of balance-sheet items (RERT
II), created by Article 131 of Law No 3-B/2010 of 28 April (€23,985 thousand). These amounts were
transferred to the Portuguese Treasury and Government Debt Agency (IGCP) in January 2011.
NOTE 19 | PROVISIONS AND ADJUSTMENTS
Accounting movements in the item provisions and adjustments during the year ended on 31 December
2011 can be summarised as follows:
Balance as
at 31 Dec.
2010
Movements Balance as
at 31 Dec.
2011Increase Decrease Net value
Adjustments to assets
Adjustments of debts receivable 76,270 - 2,069 (2,069) 74,201
Provisions for risks
Provisions for gold price risks 1,386,371 - - - 1,386,371
Provisions for foreign exchange rate risks 208,228 - 135,528 (135,528) 72,700
Provisions for securities price risks 547,538 - 79,708 (79,708) 467,830
Provisions for interest rate risks 322,103 - - - 322,103
Provisions for credit risks - 675,000 - 675,000 675,000
2,464,240 675,000 215,236 459,764 2,924,004
Provisions for risks shared with the Eurosystem
Provisions for monetary policy operations - Eurosystem
54,266 - 30,932 (30,932) 23,334
Total adjustments to assets 76,270 - 2,069 (2,069) 74,201
Total provisions 2,518,506 675,000 246,168 428,832 2,947,338
Regarding the accounting movements in provisions in 2011 the Bank reduced: (i) by €135,528 thou-
sand the provision for foreign exchange rate risks, justifi ed by the use of €1,000 for the coverage of
unrealised exchange rate losses recognised in Profi t and loss on 31 December 2011 and by a reduction of
€135,528 thousand in this provision so that coverage levels are similar to those of 2010; (ii) by
€79,708 thousand the provision for securities price risks also for the coverage of unrealised losses
recognised in profi t and loss on 31 December 2011 (€18,353 thousand) and by a reduction of
€61,355 thousand to place the provision at coverage levels similar to those of 2010, and (iii) by
€30,932 thousand the provision for the coverage of monetary policy operations, whose adjustments
result from a decision of the Governing Council of the ECB, following the assessment of the provision
for risks shared in monetary policy operations of the Eurosystem (SEC/GovC/X/12/31.R of 24 January).
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Considering the exposure to credit risk of the Bank’s assets as at 31 December 2011, a provision of
€675,000 thousand was set up for the coverage of unrealised losses, as described in Section 1.2. (l) of Note 1.
NOTE 20 | REVALUATION ACCOUNTS
31 Dec. 2011 31 Dec. 2010
Gold revaluation differences 11,933,742 9,948,916
Foreign currency revaluation differences 53,770 14,051
Securities revaluation differences 73,780 91,590
Revaluation differences 12,061,292 10,054,557
With regard to gold, there was an increase in unrealised gains resulting from the valuation of the gold
price in euro (see Note 2).
Positive revaluation differences of foreign currency are chiefl y due to assets denominated in USD and
SDRs, the two currencies with the largest relative weight in the portfolio denominated in foreign
currency.
The decrease in unrealised gains resulting from fl uctuations in the price of securities relates mainly to
securities denominated in euro, as these account for around 94% of the Bank’s securities portfolio.
NOTE 21 | CAPITAL AND RESERVES
Movements in Capital and reserves can be summarised as follows:
Balance
as at
31 Dec. 2010
Reported
Adjustments
Balance
as at
31 Dec. 2010
Restated
Increase Decrease Transfers
Balance
as at
31 Dec. 2011
Capital 1,000 - 1,000 - - - 1,000
Legal reserve 205,027 - 205,027 - - 19,837 224,864
Other reserves and retained earnings
1,174,591 (120,891) 1,053,700 61,825 (94,043) 30,978 1,052,460
1,380,618 (120,891) 1,259,727 61,825 (94,043) 50,815 1,278,324
Profi t for 2010 198,373 11,141 209,513 - (158,698) (50,815) -
Profi t for 2011 - - - 31,165 - - 31,165
1,578,990 (109,750) 1,469,240 92,990 (252,741) - 1,309,489
The capital of the Bank amounts to €1,000,000 and it may be raised, namely by incorporation of
reserves, pursuant to a decision of the Board of Directors and upon authorisation of the Minister for
Finance.
In accordance with Article 53 (2) of the Organic Law of Banco de Portugal, the net profi t for the year shall
be distributed as follows: 10% to the legal reserve (with no maximum limit), 10% to other reserves to
be decided by the Board of Directors and the remainder to the State, as dividends, or to other reserves,
as approved by the Minister for Finance, on a proposal of the Board of Directors.
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Net profi t for the year 2010 was allocated in accordance with Decision No 117/11 of 6 April 2011, of
the Minister of State and Finance by transferring the amount of €39,674 thousand to the Legal reserve
and to Other reserves and by paying to the State, as dividends, the amount of €158,698 thousand.
The adjustments disclosed in the restated balances as at 31 December 2010 result from the change in
the accounting policy regarding the recognition of actuarial gains and losses of the Pension Fund, as
described in Note 32.
The amount of €61,825 thousand relating to increases in Other reserves and retained earnings relates to
the recognition of deferred tax assets regarding tax benefi ts associated with actuarial gains and losses
of the Pension Fund, as described in Note 30.
The decrease in Other reserves and retained earnings amounted to €94,043 thousand with respect to
actuarial losses in 2011, in accordance with the new accounting policy referred to in Note 32.
NOTE 22 | NET INTEREST INCOME
31 Dec. 2011 31 Dec. 2010
Interest income
Securities 233,713 245,034
Denominated in foreign currency 19,717 19,967
Denominated in euro 213,996 225,067
Deposits and other assets 16,088 10,136
Denominated in foreign currency2,120 3,086
Denominated in euro13,968 7,050
International Monetary Fund 4,683 3,440
Lending to euro area credit institutions 578,685 330,708
Securities held for monetary policy purposes 276,866 122,329
Intra-ESCB claims 265,081 197,899
Financial fi xed assets 236,762 237,454
Off-balance-sheet instruments 124 23
Other claims 2,139 1,890
1,614,143 1,148,914
Interest expense
Liabilities to euro area credit institutions 55,884 47,178
Liabilities to euro area residents denominated in euro 46,425 20
Management liabilities denominated in foreign currency - 0
Management liabilities denominated in euro - 0
International Monetary Fund 3,647 2,693
Intra-Eurosystem liabilities 778,478 490,061
Off-balance-sheet instruments 723 1800
885,158 541,752
Net interest income 728,985 607,163
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In net interest income, there was an increase in interest income related to lending to euro area credit
institutions, interest on securities held for monetary policy purposes and adjustments to circulation,
all of them resulting from the rise in the average balances of the income items associated with the
respective remuneration rates. Partly associated with an increase in these assets, there was an increase
in Intra-Eurosystem liabilities, and hence in the corresponding interest expense. Worth noticing is also
the increase in interest expenses relating to liabilities to other euro area residents denominated in euro,
which result from the rise in the balances of the general government current accounts, as described
in Note 15.
NOTE 23 | REALISED GAINS/LOSSES ARISING FROM FINANCIAL OPERATIONS
31 Dec. 2011 31 Dec. 2010
Foreign exchange transactions (11,155) 13,616
Other fi nancial operations in foreign currency 15,036 8,769
Financial operations in euro (26,195) 146,582
Off-balance-sheet instruments (47,312) (12,794)
(69,627) 156,173
In Realised gains/losses arising from fi nancial operations in 2011, mention should be made of the signi-
fi cant amount of Realised losses, chiefl y relating to off-balance-sheet instruments, referring to interest
rate futures and to portfolio management operations denominated in euro, mainly relating to securities
portfolio transactions denominated in euro. It should be noted that for management purposes, these
derivatives are analysed together with the related assets, which are included in the Bank’s portfolios.
NOTE 24 | UNREALISED LOSSES ON FINANCIAL ASSETS AND POSITIONS
31 Dec. 2011 31 Dec. 2010
Unrealised exchange rate losses 1 39,862
Unrealised losses on investments in foreign currency 1,789 7,999
Unrealised losses on euro operations 16,563 174,117
18,353 221,978
Unrealised exchange rate losses in December 2011 were virtually nil, chiefl y due to the reduction in the
Bank’s foreign currency portfolio (see Note 4).
Unrealised losses on euro operations refer, in both years, to negative revaluation differences related to
the securities portfolio.
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NOTE 25 | INCOME FROM EQUITY SHARES AND PARTICIPATING INTERESTS
In 2011 this item included dividends received for the 2010 participating interest of Banco de Portugal: (i)
in the ECB, to the amount of €4,285 thousand (2010: €36,769 thousand), (ii) in the Bank for International
Settlements (BIS), to the amount of €2,797 thousand (2010: €6,969 thousand), and (iii) in Finangeste,
to the amount of €2,066 thousand (2010: €1,265 thousand). It also included income arising from the
allocation of euro banknotes by the ECB, to the total amount of €16,311 thousand, which in 2010 were
retained by the ECB in accordance with a Decision of the Governing Council of the ECB.
NOTE 26 | NET RESULT OF POOLING OF MONETARY INCOME
This item contains: (i) net result of pooling of monetary income for 2011 amounting to €-40,111 thou-
sand62 (2010: €-9,015 thousand) and (ii) the income relating to the share of Banco de Portugal in the
reduction of the provision for risks shared with the Eurosystem in monetary policy operations, to the
amount of €30,932 thousand (2010: €44,357) (see Note 19). The net value of this item is an income
of €9,179 thousand.
The amount of each Eurosystem NCB’s monetary income is determined by measuring the actual annual
income that derives from the earmarkable assets held against its liability base. The liability base consists
of the following items: Banknotes in circulation; Liabilities to euro area credit institutions related to
monetary policy operations denominated in euro; Net intra-Eurosystem liabilities resulting from TARGET
transactions; and Net intra-Eurosystem liabilities related to the allocation of euro banknotes within the
Eurosystem. Any interest paid by the NCBs on liabilities included within the liability base is to be deducted
from the monetary income to be pooled.
The earmarkable assets consist of the following items: Lending to euro area credit institutions related to
monetary policy operations denominated in euro; Securities held for monetary policy purposes; Claims
equivalent to the transfer of foreign reserves; Net intra-Eurosystem claims resulting from TARGET tran-
sactions; Net intra-Eurosystem claims related to the allocation of euro banknotes within the Eurosystem;
a limited amount of each NCBs’ gold holdings in proportion to each NCB’s capital key share.
Gold is considered to generate no income, and securities held by Banco de Portugal within the imple-
mentation of the CBPP are considered to generate income at the latest available marginal rate for the
Eurosystem’s main refi nancing operations. Where the value of a NCB’s earmarkable assets exceeds or
falls short of the value of its liability base, the difference shall be offset by applying to the value of the
difference the latest available marginal rate for the Eurosystem’s main refi nancing operations.
The monetary income pooled by the Eurosystem is allocated among NCBs according to the subscribed
ECB’s capital key. The difference between the monetary income pooled by Banco de Portugal, amounting
to €433,522 thousand, and reallocated to Banco de Portugal, to the amount of €393,411 thousand, is
the net result arising from the calculation of monetary income (€-40,111 thousand) (see Note 8).
62 Includes the proceeds of the calculation of monetary income for 2011, to the amount of €-41,120 thousand and adjustments of previous years, amounting to €+1,009 thousand (see Note 8).
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NOTE 27 | OTHER INCOME AND EXPENSES
31 Dec. 201131 Dec. 2010
Restated31 Dec. 2010
Reported
Other income
Capital gains on tangible and intangible fi xed assets
1,160 967 967
Previous fi scal years income 110 413 413
Sales and supply of services to third parties 3,267 3,531 3,531
Sundry income 13,326 11,287 11,287
17,863 16,198 16,198
Other expenses
Capital losses on tangible and intangible fi xed assets
8 160 160
Previous fi scal years expenses 751 27 27
Sundry expenses 3,146 2,576 9,343
3,905 2,762 9,530
13,958 18,961 6,668
Sundry income includes in particular: (i) €7,282 thousand due to the end of the exchange period of the
1,000 escudo banknote, effi gy D. Pedro V (see Note 18) and (ii) profi t resulting from the adjustment
of the value of participating interests in Finangeste, Valora and SGFP, due to the implementation of
the Net Asset Value valuation method, as explained in Section 1.2. (i) of Note 1 (€3,439 thousand,
€1,600 thousand and 157 thousand respectively).
Sundry expenses includes in 2011: (i) €1,771 thousand relating to realised losses, costs and other
expenses relating to the contract concluded with Finangeste (2010: €1,734 thousand) and (ii)
€205 thousand relating to extraordinary contributions to SAMS (social health assistance service for banking
sector employees) agreed with Banco de Portugal with the entry into force of the Acordo de Empresa
(company-level agreement) (2010: €343 thousand). It should be noted that in 2010 (reported), this item
included the annual amortisation of deferred actuarial losses relating to the Pension Fund, which did not
take place in 2011, due to the change in the accounting policy described in Note 32.
NOTE 28 | STAFF COSTS
31 Dec. 2011 31 Dec. 2010
Remuneration of the members of the Board of Directors and Board of Auditors
1120 1381
Employees’ salaries 73,334 76,378
Compulsory social charges 27,420 30,507
Voluntary social charges 7,254 7,643
Other staff costs 2,356 4,735
111,484 120,644
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Compulsory social charges include chiefl y compulsory contributions of the Bank to the general social
security scheme, to the amount of €16,393 thousand (2010: 1 261 thousand) and expenditure on reti-
rement and survivors pensions to the amount of €6,924 thousand (2010: €17,674 thousand), which, in
addition to expenditure on base plans, include expenditure on wage supplements (see Note 32).
On 31 December 2011 the Bank employed 1,689 staff (2010: 1,648). Among these, 50 were on secon-
dment/assignment arrangements deemed in the public interest, or on unpaid leave, 8 were assigned to
Valora and 37 to the SGFP.
NOTE 29 | IMPAIRMENT OF ASSETS (LOSSES/REVERSALS)
In 2011 this item records the reduction of the adjustment to Lending to other entities under the
contract for the assignment of debts signed with Finangeste, to the amount of €2,069 thousand
(2010: €5,312 thousand).
NOTE 30 | INCOME TAX
The Bank is subject to the corporate income tax and to a municipal corporate tax.
Tax authorities are allowed a four-year period during which they can review the Bank’s tax situation.
Therefore, as a result of different interpretations of tax legislation, there may be additional payments.
However, the Board of Directors of Banco de Portugal fi rmly believes that there will be no additional
signifi cant payment regarding previous fi scal years, in the context of fi nancial statements.
The corporate income tax for 2011 was calculated on the basis of a nominal tax rate of 25%, plus 4% on
taxable profi t resulting from the application of the municipal corporate tax (1.5%) and the State surtax
(2.5%, calculated according to Article 87-A of the Corporate Income Tax Code). Considering the impact
of the recognition of deferred taxes, the effective tax rate stood at around 15% in 2011.
On 31 December 2011 and 2010 the income tax item was broken down as follows:
31 Dec. 201131 Dec. 2010
Restated31 Dec. 2010
Reported
Current tax 200,768 80,427 80,427
Deferred tax (195,127) (525) 3,848
5,641 79,903 84,276
Effective tax rate 15.3% 28.3% 29.8%
It should be noted that the deferred tax item was restated due to the change in the accounting policy
regarding the recognition of actuarial gains and losses of the Pension Fund, described in Note 32.
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The calculation of the current income tax can be summarised as follows:
31 Dec. 2011 31 Dec. 2010
Profi t/loss before taxes 36,806 282,648
Negative balance sheet variations not refl ected in profi t or loss - (429)
Non-deductible provisions 675,000 -
Pension Fund and seniority bonuses (8,307) 6,667
Cancellation of the Net Asset Value effect (5,196) (3,082)
Reversal of the adjustment of taxed assets (2,069) (5312)
Cancellation of economic double taxation of distributed profi t (2,066) (1,265)
Tax benefi ts (1,748) (1,469)
Accounting capital gains (1,152) (810)
Tax gains 579 355
Charges not fully documented 260 272
Depreciation and amortization not deductible as costs 111 68
Other 276 (510)
Taxable income 692,495 277,133
Current income tax (1) 173,122 69,282
Municipal corporate tax (2) 10,249 4,102
State surtax (3) 17 262 6,878
Autonomous taxation (4) 135 165
Current income tax 200,768 80,427
Reconciliation between current tax-related losses for the year and the balance sheet balance
- Recognition as current losses for the year (1)+(2)+(3)+(4) 200,768 80,427
- Less: payments on account and additional payments on account (see Note 12)
67,848 47,919
- Less: withholdings at source 2 2
- Current balance (recoverable) / payable 132,918 32,506
Deferred tax assets and liabilities are recorded when there is a difference between the accounting value
of an asset or liability and the respective taxable amount. Their value corresponds to the tax to be reco-
vered or paid in future periods.
The restatement described above of deferred taxes on 31 December 2010 can be broken down as follows:
Computation
of deferred taxes
Assets and liabilities Profi t/loss
31 Dec. 2010Restated
31 Dec. 2010Reported
31 Dec. 2010Restated
31 Dec. 2010Reported
AssetsLiabili-
tiesAssets
Liabili-ties
Profi t/lossRetained earnings
Profi t/lossRetained earnings
Pension Fund - - - 41 262 - 41,262 4,373 -
Adjustment to lending to other entities
22,116 - 22,116 - (499) - (499) -
Seniority-bonuses 3,502 - 3,502 - (88) - (88) -
Interest rate subsidies 91 - 91 - 49 - 49 -
Other 116 387 116 387 13 - 13 -
25,825 387 25,825 41,649 (525) 41,262 3,848 -
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On 31 December 2011 Deferred tax assets and liabilities were as follows:
Computation
of deferred taxes
Assets and liabilities Profi t/loss
31 Dec. 201131 Dec. 2010
Restated31 Dec. 2011
Assets Liabilities Assets Liabilities Profi t/lossRetained earnings
Provision for credit risks 195,750 - - - (195,750) -
Pension Fund 61,825 - - - - (103,087)
Adjustment to lending to other entities
21,516 - 22,116 - 600 -
Seniority-bonuses 3,643 - 3,502 - (140) -
Interest rate subsidies 29 - 91 - 62 -
Other 4 376 116 387 101 -
282,767 376 25,825 387 (195,127) (103,087)
As referred to in Section 1.2. (n) of Note 1, in 2011 the Bank changed its accounting policy regarding the
recognition of actuarial gains and losses of the Pension Fund. These ceased to be recognised in assets to
be recognised in Retained earnings. A signifi cant share of (i) the values transferred from the balance sheet
to Retained earnings, and (ii) actuarial gains and losses of 2011, in accordance with Law No 64-B/2011
of 30 December, which approved the State Budget for 2012, will be accepted for tax purposes. Thus,
the respective deferred tax liabilities previously recorded are no longer required. Therefore, the amount
of €41,262 thousand was reversed against Retained earnings. Tax benefi ts relating to actuarial gains
and losses recognised in Retained earnings are realised in 10 years, starting in 2012, hence deferred tax
assets were recorded also against Retained earnings, to the amount of € 61,825 thousand.
As referred to in Section 1.2. (l) of Note 1, the Bank set up a provision for credit risks which cannot be
deducted for tax purposes until the materialisation of risk. As a consequence, deferred tax assets were
recognised against Profi t/loss for the year, to the amount of €195,750 thousand.
NOTE 31 | OFF-BALANCE-SHEET INSTRUMENTS
Collateral given, items held in custody and other commitments to third parties
On 31 December 2011 and 2010 the values of collateral given, securities and other items held in custody
by the Bank and irrevocable credit lines were as follows:
31 Dec. 2011 31 Dec. 2010
Collateral given 487,632 350,000
Items held in custody 37,542,499 20,338,544
Irrevocable credit lines 2,790,063 2,562,295
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Collateral given includes the promissory note signed by the Bank in favour of the IMF, whose amount
increased in 2011 as part of the increase in the quota, was paid up in 2011 (see Note 3).
The Items held in custody include mainly: (i) Securities owned by the State (ii) securities received as
collateral in Eurosystem monetary policy operations, under the correspondent central banking model
and (iii) the value of the promissory note in favour of the IMF issued by the Portuguese Republic,
under the Economic and Financial Assistance Programme (Extended Fund Facility), to the amount of
€13,114,031 thousand (see Note 15).
The item Irrevocable credit lines includes intraday credit lines of the Portuguese fi nancial system and a
credit line granted to the IMF (€1,060 million) within the scope of the bilateral borrowing agreement
between the Bank and the IMF signed in December 2009 (see Note 3).
Financial instruments
The Bank, in the performance of its tasks, uses derivative fi nancial instruments chiefl y intended to
manage risks associated with its assets, liabilities and off-balance-sheet positions. These instruments
normally have an underlying (i) market risk inherent in price or interest rate fl uctuations and (ii) credit
risk, generally corresponding to the advance settlement or replacement cost of contracts at current
market prices and rates.
On 31 December 2011 and 31 December 2010 the Bank posted the following open positions:
31 Dec. 2011 31 Dec. 2010
Contract (1) Market value (2) Profi t/Loss (3) Accrued
interest (4)
Contract value (1)
Purchases Sales Net Net Net Purchases Sales
Currency Forwards - - - - - 9,720 9,720
Currency swaps 75,000 75,000 (1,793) (1,756) (37) 23,864 23,864
Interest rate futures - 379,107 - - - - 175,745
(1) Theoretical or notional value of the contract.(2) The market value corresponds to income or expenses associated to the potential closing of open positions, taking into account current market condi-
tions and the valuation models commonly used.(3) The effect on profi t/loss corresponds to the impact on the profi t and loss account of the potential closing of open positions, taking into account current
market conditions and the valuation models commonly used.(4) The value of accrued interest corresponds to interest income and expense plus open positions until the balance sheet date.
Legal proceedings
In addition to the values recognised in liabilities on account of legal disputes, the Bank fi rmly believes, on
this date, that it will not incur any signifi cant expenses related to other outstanding legal proceedings.
NOTE 32 | LIABILITIES RELATED TO RETIREMENT PENSIONS AND OTHER BENEFITS
Pension Fund of Banco de Portugal – Defi ned-benefi t plan
(i) OverviewUntil 31 December 2010 Banco de Portugal was the sole entity responsible for the payment of the retire-
ment and survivors pensions of the staff (and their dependents) hired by the Bank before 3 March 2009,
provided they were covered by a substitutive social security scheme, enshrined in the collective labour
regulations for the banking sector. Therefore, Banco de Portugal, through its Pension Fund, was responsible
for the payment of retirement and survivors pensions, supplementary benefi ts and death grants, as well
as for the payment of pensions’ inherent charges, due as contributions to the social healthcare system.
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Decree-Law No 1-A/2011 of 3 January laid down that, from 1 January 2011, the active staff of Banco de
Portugal, who were registered in Caixa de Abono de Família dos Empregados Bancários – CAFEB (family
allowance fund of bank employees)63 and covered by the current Pension Fund – Defi ned Benefi t Plan,
are now integrated in the general social security scheme with respect to the old-age pensions.
Therefore, after 1 January 2011, those pensions ceased to be covered in full by the Pension Fund, but it
remained under its responsibility the payment of disability and death grants, as well as of the supplement
intended to make up for the difference between statutory old-age pensions under the general social
security scheme and the benefi ts defi ned in the respective pension plans, based on the respective labour
agreements for the banking sector and the Bank’s internal regulations.
This Pension Plan operates four benefi t schemes relating to the basic salary and seniority supplements
and three schemes relating to wage supplements. All schemes are currently closed to staff who started
working in the banking sector after 2 March 2009 (Decree-Law No 54/2009 of 2 March).
The number of participants covered by the Pension Fund of Banco de Portugal is shown in the table below:
Number of participants 31 Dec. 2011 31 Dec. 2010
Active staff 1,463 1,513
Retired staff 1,872 1,863
Pensioners 532 534
3,867 3,910
The assumption for life expectancy for scheme participants and benefi ciaries is the following:
Average life expectancy (years) 31 Dec. 2011 31 Dec. 2010
Active staff 34 35
Retired staff 18 19
Pensioners 12 12
(ii) Methodology and assumptions
Liabilities arising from the pension plans funded through the Pension Fund were calculated on an actuarial
basis by SGFP of Banco de Portugal, using the Projected Unit Credit Cost Method, in accordance with
the principles laid down in IAS 19.
The changes imposed by Decree-Law No 1-A/2011 of 3 January led to a revision of the actuarial model
adopted, so that in the future the complementary nature of the general social security system can be
recognised.
63 Dissolved by this Decree-Law.
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Notwithstanding the fact that in the coverage of the other post-employment benefi ts – benefi ts related to
retirement pensions due to disability and survivors pensions – liabilities remained under the responsibility
of the Pension Fund, the model was subject to a number of technical adjustments and other structural
changes in order to refl ect the progressive transfer of liabilities to the general social security scheme.
The gradual recognition of the partial transfer of the coverage of old-age pensions is in accordance with
the guidance given by the National Council of Financial Supervisors (Conselho Nacional de Supervisores
Financeiros).
The revision of the actuarial model also took into account the safeguard of vested rights as at 31 December
2010, both under the general social security scheme and under the substitutive scheme of the banking
sector. With reference to 1 January 2011, the impact on the accounts of the partial transfer of old-age
pensions to the social security was quantifi ed. As explained above, this impact is progressively recognised
from 2011 onwards and therefore it is seen in the value of costs pertaining to the same time period. The
reduction in the current service cost of the Pension Fund stood at 49.5%.
The main actuarial and fi nancial assumptions are the following:
Actuarial and fi nancial assumptions used
2011 2010
Discount rate 4.49% 4.80%
Expected return rate on the Fund’s assets 4.80% 5.15%
Expected wage growth rate
1.st year 1.00% 0.00%
subsequent years 3.08% 3.11%
Pensions rate of increase
1.st year 0.00% 0.00%
subsequent years 2.08% 2.11%
Tables used
- mortality TV 88/90
- disability 1978 - S.O.A. Trans. Male (US)
- turnover T-1 Crocker Sarason (US)
Statutory retirement age retirement pension 65 years 65 years
Percentage of married participants 80% 80%
Age difference between spouses 3 years 3 years
(iii) Accounting policy changes
In 2011 the Bank changed its accounting policy regarding the recognition of actuarial gains and losses
of the Pension Fund. Until 2010, the Bank followed the option, provided for in IAS 19, of recognition of
actuarial gains and losses according to the ‘corridor’ approach, up to a maximum value of 10% of the
highest value from the liabilities and the assets of the Fund. The value exceeding this limit was recog-
nised in the profi t and loss account, during a defi ned period. In 2011, in anticipation of developments
currently foreseen for IAS 19, the Bank decided to change the accounting policy, directly recognising
actuarial gains and losses in retained earnings (equity), in accordance with the accounting rules described
in Section 1.2. (n) of Note 1.
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The table below presents the result of the restatement of the balance sheet of Banco de Portugal as at
31 December 2010, resulting from the accounting policy change, referred to above:
31 Dec. 2010Restated
Adjustments31 Dec. 2010
Reported
Assets 99,598,671 -151,012 99,749,683
11. Other assets 6,817,805 -151,012 6,968,817
11.5. Accruals and prepaid expenses 536,061 -27,070 563,131
Deferred costs of the Pension Fund as at 31 Dec. 2009 - -20,727 20,727
Actuarial gains and losses of 2010 - -13,111 13,111
Amortisation of deferred costs of 2010 - 6,768 -6,768
11.6. Sundry 185,775 -123,942 309,716
Values in the ‘corridor’ as at 31 Dec. 2009 - -127,095 127,095
Actuarial gains and losses of 2010 - 3,153 -3,153
Liabilities and equity 99,598,671 -151,012 99,749,683
11. Sundry 402,981 -41,262 444,242
11.2. Accruals and income collected in advance 72,269 -41,262 113,531
Deferred tax liabilities - Pension Fund as at 31 Dec. 2009 - -36,888 36,888
Change in deferred taxes - Pension Fund as at 31 Dec.
2010
- -4,373 4,373
14. Capital and reserves 1,259,727 -120,891 1,380,618
14.2. Reserves and retained earnings 1,258,727 -120,891 1,379,618
Values in the ‘corridor’ as at 31 Dec. 2009 -127,095 -127,095 -
Deferred costs of the Pension Fund as at 31. Dec. 2009 -20,727 -20,727 -
Actuarial gains and losses of 2010 -9,958 -9,958 -
Deferred tax liabilities - Pension Fund as at 31 Dec. 2009 36,888 36,888 -
15. Profi t and loss account (net) 209,513 11,141 198,373
Amortisation of deferred costs of 2010 - 6,768 -6,768
Deferred tax liabilities - Pension Fund as at 31 Dec. 2010 - 4,373 -4,373
Net profi t for the year 209,513 11,141 198,373
20. Other costs and losses -2,762 6,768 -9,530
Amortisation of deferred costs of 2010 - 6768 -6768
24. Income tax -79,902 4,373 -84,276
24.2. Income tax – deferred 525 4,373 -3,848
Change in deferred taxes - Pension Fund 2010 - 4,373 -4,373
In this context, the balance of values in the ‘corridor’ and deferred costs became nil, and the cumulative
value of gains and losses recognised in these items (€151,012 thousand) as at 31 December 2010 was
transferred to retained earnings. The negative net value of €94,043 thousand, relating to actuarial gains
and losses calculated in 2011, was directly recognised in retained earnings in accordance with the new
accounting policy.
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The restatement of reported balances as at 31 December 2010 of accruals and prepaid expenses refl ects
the reversal of deferred tax liabilities, relating to the balance sheet position with the Pension Fund (see
Note 30). As to the profi t and loss account, the restatement relates to the annulment (i) of the annual
amortisation of deferred actuarial gains and losses and (ii) of the increase in deferred tax liabilities of 2010.
The restated amount of reserves and retained earnings, as at 31 December 2010, refl ects a reduction
of €120,891 thousand in comparison with the amount reported on the same date, as a consequence
of the above-mentioned movements.
(iv) Changes in assets and liabilities of the Pension Fund
31 Dec. 2011 31 Dec. 2010
Retired
staff and
pensioners
Active staff Total
Retired
staff and
pensioners
Active staff Total
Total past service liabilities
Retirement and survivors pensions
725,171 460,429 1,185,600 715,111 437,180 1,152,292
Contributions to SAMS related to pensions
43,812 22,736 66,548 43,033 20,743 63,776
Death grants 15,648 9,163 24,811 14,962 8,388 23,350
784,631 492,328 1,276,959 773,107 466,311 1,239,418
Fair value of plan assets 1,255,092 1,230,687
Surplus/(defi cit) (21,867) (8,730)
Funding ratio 98.3% 99.3%
Changes in past service liabilities in 2011 were as follows:
Past service liabilities 31 Dec. 2011 31 Dec. 2010
Value at the beginning of the year 1,239,418 1,270,946
Current service cost 8,954 20,161
Pensions payable (expected value) (59,578) (56,173)
Interest cost 59,485 65,423
Actuarial gains and losses 28,680 (60,940)
Value at the end of the year 1,276,959 1,239,418
The Fund’s assets can be summarised as follows:
Fund’s assets 31 Dec. 2011 31 Dec. 2010
Value at the beginning of the year 1,230,687 1,262,326
Current contributions paid to the Fund 12,180 20,999
Contributions paid on account of early retirements 4,067 9,448
Extraordinary contributions paid to the Fund 74,000 -
Pensions paid (61,523) (56,118)
Net income of the Fund (4,320) (5,968)
Value at the end of the year 1,255,092 1,230,687
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The Fund’s assets can be broken down as follows:
Fund’s investments 31 Dec. 2011 31 Dec. 2010
Land and buildings 66,956 67,314
Variable income securities 197,658 177,864
Fixed income securities - Bonds 956,213 970,276
Cash and bank deposits 20,534 7,528
Other 13,731 7,706
1,255,092 1,230,687
At the end of 2011 the funding ratio of the Pension Fund stood at 98.3%, slightly down from 2010
(99.3%). In order to reach the targeted funding ratio, Banco de Portugal made an extraordinary contri-
bution of €74,000 thousand at the end of 2011, to make up for the impact on actuarial results of the
revision of the indexes used for calculating the discount rate, amidst high instability in euro area public
debt markets.
Losses in 2011 and 2010 can be broken down as follows:
31 Dec. 2011 31 Dec. 2010
Actuarial gains and losses
Population movements (14,630) (25,138)
Technical gains and losses 6,464 10,013
Wage growth (6,207) (2,746)
Increase in pensions 7,869 2,351
Adjustments to the model (1) 625 162
Other gains and losses - (342)
Change in assumptions:
Wage growth 12,326 71,674
Increase in pensions 17,794 61,704
Discount rate (52 921) (56,739)
(28,680) 60 940
Financial gains and losses
Gains and losses in paid pensions (1,945) 56
Gains and losses in expected income of the Fund (63,418) (70,953)
(65,363) (70,897)
(94,043) (9,958)
(1) Adjustments of the model refer, in 2010, to the freezing of Plan 3 and, in 2011, to the revision of the model, due to the partial transfer to the general social security scheme of liabilities related to the old-age pensions.
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Balances relating to the Pension Fund can be summarised as follows:
31 Dec. 201131 Dec. 2010
Restated31 Dec. 2010
Reported
Surplus/(defi cit) (21 867) (8730) (8730)
Values in the ‘corridor’ - - 123 942
Deferred costs – Actuarial gains and losses - - 27 070
(21 867) (8730) 142 281
Values recognised in profi t and loss, relating to the Pension Fund can be summarised as follows:
20112010
Restated2010
Reported
Staff costs
Current service cost (1) 6,537 17,237 17,237
Interest costs 59,485 65,423 65,423
Expected return on the Fund assets (59,098) (64,986) (64,986)
6,924 17,674 17,674
Other costs and losses
Annual amortisation of deferred actuarial gains and losses
- - 6,768
(1) Excludes costs borne by staff and other entities.
It should be noted that in 2011 the value of liabilities for past services recorded for the fi rst time a smaller
cost (current service cost) associated with the old-age coverage offset by social security rights obtained.
Pension Fund of Banco de Portugal – Defi ned contribution plan
The changes introduced in the company-level agreement of Banco de Portugal (Acordo de Empresa),
published on 22 June 2009 in Boletim do Trabalho e Emprego (work and labour bulletin) provided for
the setting up of a supplementary defi ned contribution pension plan, fi nanced through contributions
of the Bank and its staff, as regards Banco de Portugal staff who started working in the banking sector
after 3 March 2009 and are covered by the general social security scheme pursuant to Decree-Law
No 54/2009 of 2 March (see Note 1.2. (n)). This plan was created in 2010, backdated to 23 June 2009.
This supplementary defi ned contribution pension plan, which is contributive, with vested rights, is
voluntary for the participants and compulsory for the associate whenever the participant adheres to
this pension plan.
The choice of the pension fund in which these contributions are invested is the employee’s responsibility
and can be annually changed.
Banco de Portugal set up a Pension Fund in order to create an alternative funding vehicle for its employees
who wish to join it.
At the end of 2011 the supplementary pension plan funded through this Pension Fund covered
227 participants.
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When the Pension Fund was set up, Banco de Portugal made an initial contribution of €5 million, which
constituted a reserve account in its name. Participation units of this reserve account are transferred
monthly to the individual accounts of its participants by the corresponding amounts:
(i) Contributions from Banco de Portugal; and
(ii) Contributions from the active participants (by withholding each month the respective
amounts when salaries are processed).
Yields on funds earmarked for the reserve account will automatically revert to this account via the change
in the market value of participation units.
As at 31 December 2011 the assets of the Fund amounted to €5,077 thousand, broken down as follows:
Participation units (in value) 31 Dec. 2011 31 Dec. 2010
Reserve account 4,873 4,923
Participants’ individual accounts 204 74
5,077 4,997
Seniority bonuses
The amount of liabilities for past services relating to seniority bonuses as at 31 December 2011 totalled
€12,561 thousand (2010: €12,077 thousand) (see Note 18). The value of actuarial gains and losses
referring to these obligations was recognised directly under Profi t/loss, having reached €-626 thousand
in 2011 (2010: 522 thousand).
In 2011, SGFP revised the method for the setting of actuarial and fi nancial assumptions relating to these
obligations, for a better adjustment of the respective evaluation model. The main actuarial and fi nancial
assumptions are the following:
Actuarial and fi nancial assumptions used
2011 2010
Discount rate 4.08% 4.80%
Expected wage growth rate
1.st year 1.00% 1.00%
Subsequent years 2.77% 3.11%
Tables used
- mortality TV 88/90
- disability 1978 - S.O.A. Trans. Male (US)
- turnover T-1 Crocker Sarason (US)
First retirement pension 65 years 65 years
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NOTE 33 | RISK MANAGEMENT
Taking into account the role and unique nature of the functions of a central bank, risk management by
Banco de Portugal not only aims at ensuring the sustainability and profi tability of the Bank itself, but
also and foremost at meeting its responsibilities, by guaranteeing the maintenance of the stability of the
Portuguese banking system and as a member of the ESCB. Therefore and like most central banks, Banco
de Portugal is committed to pursuing a strict risk management policy, as any deviation could seriously
jeopardise the carrying out of its functions.
The Board of Directors of Banco de Portugal defi nes and monitors on an on-going basis the integrated
management of the risks incurred by the Bank, through the permanent identifi cation and analysis of
the Bank’s exposure to the different types of risk. This monitoring is supported by the most adequate
techniques and regular reviews and analyses.
In this context, in view of its functions and responsibilities, Banco de Portugal takes mainly into account
the following risks:
Market risk
Market risk is the risk associated to losses arising from price fl uctuations and market rates, therefore
comprising interest rate risk, foreign exchange rate risk and gold price risk.
The exposure to foreign exchange rate risk and interest rate risk arises from the own fund investments.
The gold price risk denominated in euro, which is the main source of market risk, is a result of the Bank’s
stock of gold, which is not currently actively managed by the Bank.
The declining trend in exchange rate exposures, considering that the volume of foreign currency is
contained at relatively reduced levels, is one of the main features of recent developments.
Monitoring and control of market risk is made through Value at Risk (VaR) indicators, which are produced
and monitored on a daily basis, being further supplemented by regular stress testing exercises.
Credit risk
Credit risk is the risk of loss arising from the failure of a counterparty or an issuer to meet its fi nancial
obligations to the Bank. The reduction of the market value of assets resulting from the deterioration of
the credit profi le of counterparties and issuers is also included in the concept of credit risk.
The exposure to credit risk arises from asset management operations and from monetary policy operations.
Credit risk in asset management operations is controlled by applying a number of eligibility criteria and
the limits set out in the Guidelines (Normas Orientadoras) endorsed by the Board of Directors of Banco
de Portugal. The mentioned criteria and limits are based on risk ratings assigned by rating agencies and
incorporate a qualitative assessment of all information available, including the use of market indicators.
Credit risk is regularly monitored and measured by VaR.
The exposure to credit risk arising from monetary policy operations results from the application of the
capital key of Banco de Portugal to the Eurosystem’s global exposure. The control of these risks is made
by applying a number of rules and procedures endorsed at Eurosystem level. Follow-up and monitoring
is made through a series of risk indicators produced by the ECB.
In the specifi c case of the Securities Markets Programme portfolio, set up within the framework of the
non-standard monetary policy operations, Banco de Portugal monitors its exposure on a regular basis
through VaR measures produced by the Bank.
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Liquidity risk
Liquidity risk is the risk of an entity being unable to meet all its obligations on fi nancial settlement. In
the case of Banco de Portugal this risk is residual, considering that in addition to a strict control of the
maturities schedule, most assets held in the Bank’s portfolio have a high level of liquidity in the market.
Operational risk
Operational risk arises as a result of losses incurred due to weaknesses or inadequate performance of
internal business processes, staff or systems, or third-party actions.
Banco de Portugal has devoted considerable attention to putting in place mechanisms for the identifi cation
and mitigation of the risks associated to its activity. These functions are performed by a special unit, in
close cooperation with the Committee for Risk and Security Coordination (Comissão da Coordenação
de Riscos e Segurança – CCS), chaired by a member of the Board of Directors.
NOTE 34 | SUBSEQUENT EVENTS
In February 2012 government debt securities issued by the Hellenic Republic, held by the Eurosystem’s
NCBs were confi rmed to be excluded from the Greek sovereign debt restructuring, under the Private
Sector Involvement (PSI).
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4. EXTERNAL AUDITORS’ REPORT
AUDITOR’S REPORT
Introduction
1 We have audited the accompanying fi nancial statements of Banco de Portugal, which comprise
the balance sheet as at 31 December 2011, the profi t and loss account for the year then ended, as well
as a summary of the accounting policies and other explanatory notes.
Board of Directors’ responsibility for the Financial Statements
2 The Board of Directors is responsible for the preparation and fair presentation of these fi nancial
statements in accordance with the accounting principles of the Chart of Accounts of Banco de Portugal
and for the internal control relevant to the preparation of fi nancial statements that are free from material
misstatement, due to fraud or error.
Auditor’s Responsibility
3 Our responsibility is to express an opinion on these fi nancial statements based on our audit. We
have conducted our audit in accordance with International Standards on Auditing. Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance whether the fi nancial statements are free from material misstatement.
4 An audit involves performing procedures to obtain audit evidence about the amounts and disclo-
sures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud
or error. In making those risk assessments, the auditor considers internal control relevant to the Bank’s
preparation and fair presentation of the fi nancial statements in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effective-
ness of the Bank’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the Board of Directors, as well
as evaluating the overall presentation of the fi nancial statements.
5 We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a
basis for our audit opinion.
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Opinion
6 In our opinion, the fi nancial statements present fairly, in all material respects, the fi nancial position
of Banco de Portugal as at 31 December 2011 and of its fi nancial performance for the year then ended,
in accordance with the accounting principles in the Chart of Accounts of Banco de Portugal, which are
summarised in Note 1.2. of the Notes on the fi nancial statements.
Lisbon, 8 March 2012
PricewaterhouseCoopers & Associados
– Sociedade de Revisores Ofi ciais de Contas, Lda.
represented by:
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5. REPORT AND OPINION OF THE BOARD OF AUDITORS
In accordance with the provisions laid down in Article 43 (1) (c) of the Organic Law of Banco de Portugal,
the Board of Auditors submits its Report and issues its Opinion on the Financial Statements and respective
Notes for the year ended on 31 December 2011, which were approved by the Board of Directors at its
meeting on 6 March 2012.
Report
1. The Board of Auditors, in use of the powers conferred on it, and similarly to past years, has moni-
tored the operation of the Bank, through the participation, without voting rights, of its members in the
meetings of the Board of Directors and through the analysis of the documentation produced, namely
by the Accounting Department and the Audit Department.
The analysis of the monthly accounting data has also enabled the Board of Auditors to monitor the
evolution of the Bank’s economic and fi nancial situation.
The checks of existing assets and valuables held by the various areas of the Bank continued to be made
by the offi cials in charge and by the Audit Department, within a prior programming schedule. The Board
of Auditors has monitored the end-of-year inspection of valuables carried out at the Bank’s head offi ce
and at the Carregado Complex.
The Board of Auditors at its meetings appraised reports and data submitted to it, preparing working
documents and issuing opinions or making recommendations, whenever necessary, as described in the
respective minutes.
In accordance with the Organic Law of Banco de Portugal, the Board of Auditors assessed and issued
opinions on the Bank’s Administrative and Operating Budget for 2012.
Following a recommendation of the International Monetary Fund (IMF) regarding the extension of the
supervisory powers of the Bank’s control structures and in terms of compliance, the Board of Auditors
Charter was approved in December 2011, by agreement between the Board of Directors and the Board
of Auditors, which in addition to the tasks enshrined in the Organic Law of Banco de Portugal, increases
its competences regarding (i) internal control and risk management, (ii) fi nancial reporting, (iii) external
audit and (iv) internal audit.
In addition to the tasks entrusted to it by the Organic Law of Banco de Portugal, the Board of Auditors,
pursuant to the provisions of specifi c legislation, continued to monitor the operation of the Deposit
Guarantee Fund, Mutual Agricultural Credit Guarantee Fund and Mutual Counterguarantee Fund, and
to issue its opinion on the annual report and accounts of these funds.
2. The Bank’s activities are explained in the Report of the Board of Directors, which also contains
comprehensive information on its economic and fi nancial situation for the fi scal year ended on
31 December 2011. The Report of the Board of Directors has been restructured, so as to follow the stra-
tegic planning adopted, which has set the four following broad guidelines for the 2011/2013 period: (i)
fi nancial stability within the European context; (ii) effective and fully fl edged contribution to the Bank’s
functions as monetary authority within the framework of the Eurosystem; (iii) organisation and effi cient
management of its resources; and (iv) communication and supply of services to the community.
The Notes on the fi nancial statements include detailed information on both the fi nancial statements and
the main accounting policies and valuation criteria.
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3. The main changes in the fi nancial statements by comparison with 2010 are highlighted below:
Assets
– increase of €1,985 million in Gold, resulting both from positive developments in the price of gold
in US dollars and from the appreciation of the US dollar against the euro (3.2%); given market
volatility, the Bank continues to have a provision for gold price risks, amounting approximately
to €1,386 million;
– decrease of €3,172 million in Foreign reserves and euro assets (net), of which €1,459 million
relate to investments (deposits, securities and other) denominated in foreign currency and
€1,713 million to investments denominated in euro, including the trading portfolio and the
medium-term investment portfolio;
– increase of €8,210 million in Claims related to monetary policy operations, of which €5,103
million relate to Lending to credit institutions and €3,108 million to Securities held for monetary
policy purposes; any risks associated with these securities, if they materialise, will be shared by
all Eurosystem NCBs in proportion to the prevailing ECB capital key shares;
– increase of €2,824 million in Intra-Eurosystem claims, essentially associated with Net claims related
to the allocation of euro banknotes within the Eurosystem.
Liabilities
– increase of €1,076 million in Banknotes in circulation, refl ecting the increase in total circulation
at Eurosystem level and the share allocated to Banco de Portugal;
– increase of €770 million in Liabilities to euro area credit institutions related to monetary policy
operations denominated in euro, chiefl y resulting from an increase in current accounts and a
decrease in the deposit facility;
– increase of €4,868 million in Liabilities to other entities denominated in euro, chiefl y resulting
from the value of the current accounts of the Portuguese Treasury and Government Debt Agency
(IGCP) relating to the funds received under the economic and fi nancial assistance programme
to Portugal; in accordance with the principle of neutrality, the Bank will have no profi t or loss
resulting from these funds;
– increase of €1,043 million in Intra-Eurosystem liabilities, essentially arising from TARGET accounts
(net);
– increase of €2,007 million in Revaluation differences, mostly due to the appreciation of gold;
– increase of €429 million in Provisions for risks, basically related to the setting up of a provision
for credit risks, to the amount of €675 million.
Own funds
– at the end of 2011 the Own funds of Banco de Portugal (capital, reserves, provisions and
revaluation differences) reached €16,287 million, corresponding to an increase of approximately
€2,333 million in the period under review.
Profi t and Loss Account
– increase of €122 million in Interest margin, mostly due to higher growth of interest bearing
assets than in interest bearing liabilities;
– decrease of €226 million in Realised gains/losses arising from fi nancial operations, chiefl y
resulting from losses arising from transactions in securities denominated in euro, as well as from
losses on interest rate futures and a decrease of €204 million in Unrealised losses on fi nancial
assets and positions, recognised at the end of the year and resulting from the valuation of the
securities portfolio;
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– decrease of €45 million in Net result of pooling of monetary income;
– increase of €297 million in provisions chiefl y to cover credit risks;
– decrease of €10 million in Administrative expenses, chiefl y refl ecting a reduction in Staff costs
of approximately 8%;
– decrease of €167 million in Profi t for the year, chiefl y resulting from an increase in Provisions
for risks.
4. In 2011 Banco de Portugal recorded a profi t of €31,165,212.83. The Board of Directors, in accordance
with Article 53 (2) of the Organic Law of Banco de Portugal will submit to the Minister of State and
Finance the following proposal for the distribution of profi t:
- pursuant to subparagraph (a) - 10 % to the legal reserve €3,116,521.28
- pursuant to subparagraph (b) - 10 % to other reserves €3,116,521.28
- pursuant to subparagraph (c) - 20 % to other reserves €6,233,042.57
- also pursuant to subparagraph (c) - 60 % to the State,
as dividends €18,699,127.70
5. The External Auditors issued their report without any qualifi cation or emphasis.
Opinion
In view of the data shown and on the basis of analyses carried out and information obtained, the Board
of Auditors raises no objection to the approval of the 2011 Report of the Board of Directors and the
Financial Statements, nor to the proposal for the distribution of profi t.
The Board of Auditors wishes to express to the Governor, the Board of Directors and the entire staff of
the Bank its appreciation for their cooperation.
Lisbon, 27 March 2012
O CONSELHO DE AUDITORIA
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