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Proposed Law No. 225 /X

Exhibition of Motives

The present proposed law aims to establish the possibility of extraordinary granting of

personal guarantees of the State in the framework of the initiative to strengthen financial stability and

of providing liquidity in the financial markets.

The granting of guarantees by the State in the framework of this initiative is intended to ensure the

compliance with the obligations of credit institutions with registered office in Portugal in the framework

of its financing or refinancing operations and aims, in general terms,

promote the liquidity conditions in the money and financial markets and, to that extent,

to ensure the regularity of financing to the economy.

In this framework, the granting of guarantees must process in accordance with procedures

céleres and agile, which involve the entities with responsibilities in the implementation of the

present initiative. Thus, the application for granting these guarantees must be carried out with the

Bank of Portugal and the Institute of Treasury Management and Public Credit, I. P., which

proceed to their analysis and submit a proposal for a decision, duly

grounded, to the member of the government responsible for the area of finance, to whom it competes

the decision.

After the issuance of the State guarantees, it is up to the General Directorate of the Treasury and Finance

follow up and ensure the respective management and scrutinise compliance with the charges

emerging from its execution. Attentive to the role of the Bank of Portugal and the Institute of Management

of the Treasury and the Public Credit, I. P., in the implementation of the initiative, the said

competencies are exercised in articulation with these entities.

Considering, in particular, that this extraordinary regime of granting guarantees if

inserts into the current context of the financial system, where the liquidity constraints in the

international monetary and financial markets are causing strong pressure on

credit institutions, the present regime has transitional character by holding only

in force while the current situation justifies it.

It was heard the Bank of Portugal.

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Thus:

Under the terms of the paragraph d) of Article 197 (1) of the Constitution, the Government presents to the

Assembly of the Republic the following proposal for a law.

Article 1.

Subject

This Law sets out the possibility of extraordinary granting of personal guarantees

by the State, for the enhancement of financial stability and the provision of liquidity in the

financial markets.

Article 2.

Scope

This Law applies to the granting, by the State, of personal guarantees to the fulfilment of the

obligations assumed in financing contracts, including the renewal of the

respective operations by the credit institutions seated in Portugal.

Article 3.

Assumption of personal guarantees by the State

1-A assumption of personal guarantees by the State referred to in the preceding article only may

be carried out in accordance with the standards provided for in this Law, under penalty of nullity.

2-A violation by members of the Government of the provisions of this Law constitutes

crime of liability punishable under Article 14 of Law No. 34/87, 16 of

July.

Article 4.

Instruction and order decision

1-The application for the granting of warranty is accompanied by the minuta of the contract of

funding by defining, inter alia, the actors in the operation, the terms and the

financial conditions of the same.

2-The application is filed with the Bank of Portugal and the Institute of Management of the

Treasury and Public Credit, I. P., which proceed to their analysis by referring to

respective proposal for a decision, duly substantiated, to the member of the government

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responsible for the area of Finance.

3-A The granting of personal guarantees from the State competes with the member of the government

responsible for the area of finance, with faculty of delegation.

Article 5.

Deadline for commencement of operation

1-A Personal guarantee of the State shall lapse one month after the date on which the credit institution

beneficiary to take notice of the concession, if in the meantime it has not been given start

to the financing operation.

2-Without prejudice to the provisions of the preceding paragraph, a higher time limit may be set, of

express and duly substantiated mode, in the act of granting the guarantee.

Article 6.

Surveillance and monitoring

1-Without prejudice to the competence of the remaining entities endowed with inspective functions,

compete for the Directorate General of the Treasury and Finance to ensure and scrutinise compliance

of the emerging burdens of the execution of the guarantees granted under this Act,

as well as follow up and ensure the management of the guarantees after their issuance.

2-The competences provided for in the preceding paragraph are exercised in articulation with the

Bank of Portugal and the Institute of Treasury Management and Public Credit, I. P., nos

terms of protocol to be concluded with these entities, subject to approval of the member

of the government responsible for the area of finance.

Article 7.

Beneficiaries and their responsibilities

It is published in an annex to the State General Account the nominal relationship of the beneficiaries of the

personal guarantees of the State granted under this Act, with an indication of the

respective responsibilities, ascertained December 31 of each year, as well as with the

indication of the total liabilities of the State by guarantees provided, duly

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discriminated against and with reference to the same date.

Article 8.

Regulation

The member of the government responsible for the area of finance defines it by porterie:

a) The elements to be submitted together with the application of the guarantee for the purpose of the

respective statement;

b) The deadlines for submission of the proposal for a decision laid down in Article 5 (2),

ears the Bank of Portugal and the Institute of Treasury Management and Credit

Public, I. P., as well as for the decision of the application;

c) The elements of information to be provided and too many ancillary obligations to be fulfilled

by the beneficiary entities of the guarantee;

d) The mechanisms for fixing and revising the commissions to be borne by the entities

beneficiaries of the warranty, under appropriate commercial conditions;

e) The reporting procedures for reporting and monitoring of entities

beneficiary in the pendency of the guarantee;

f) The general mechanisms for actuation of guarantees;

g) The terms relating to the provision of counter-guarantees;

h) Other general conditions applicable to the granting of the guarantee.

Article 9.

Subsidiary regime

The granting of personal guarantees provided for in this Law shall apply in a subsidiary way, with

the necessary adaptations and in what with this is not incompatible, the scheme provided for in the Act

n. 112/97, of September 16.

Article 10.

Exceptional regime of guarantees

Exceptionally, to the limit laid down in Article 105 (1) of the Law No 67-A/2007 of 31

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of December, which approves the State Budget for 2008, plus 20 thousand million

euro for guarantees to be granted pursuant to this Law.

Article 11.

Entry into force

This Law shall come into force on the day following that of its publication.

Seen and approved in Council of Ministers of October 12, 2008

The Prime Minister

The Minister of the Presidency

The Minister of Parliamentary Affairs