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Proposal for Law No 127 /XII

Exhibition of Motives

The Law No. 63-A/2008 of November 24 laying down measures for the strengthening of soundness

financial institutions of credit institutions in the framework of the initiative for the enhancement of stability

financial and the provision of liquidity in financial markets, aimed to combat the

effects of the international financial crisis, re-establish the confidence of economic agents and

the normal functioning of financial markets, in the context of a concerted effort

between the various Member States of the European Union.

In accordance with Article 2 (2) of the said Law No 63-A/2008 of 24 of

november, the resource for public investment is carried out in accordance with principles of

need and proportionality, remuneration and guarantee of the capitals invested and

minimization of the risks of distortion of competition, and the State may not exercise,

whatever your participation in the social capital of the institution of credit, domain or

control over the institution, pursuant to Article 486 of the Code of Societies

Commercials and Article 13 (2) of the General Regime of Credit Institutions and

Financial Societies, approved by the Decree-Law No. 298/92 of December 31.

Attentive to the need to adapt the constant standards of Law No. 63-A/2008, 24 of

november, the rules and guidelines of the European Union in State aid,

it becomes necessary to promote the repeal of the prohibition of exercise of control by the

State on credit institutions, set out in Article 2 (2) of the said Law.

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In that sense, the present amendment aims to allow the State the exercise of control over

a credit institution that is the object of a capitalization operation with recourse to the

public investment, in the situations in which it is possible for the exercise of control.

So, for example, when the state subscribs to or acquies a stake in the capital

social of a credit institution that ascribe to it control over the same, may, in

obedience to a principle of control of investment of public funds, exercise the

voting rights inherent in its participation, without prejudice to the threshold for the exercise of

voting rights set out in Article 3 of the Portaria n 150-A/2012 of May 17,

changed by the Portaria n. 421-A/2012 of December 21.

This amendment allows not only to adapt the constant standards of Law No. 63-A/2008, 24 of

november, the rules and guidelines of the European Union on State aid

how it constitutes a strong incentive to foster the commitment of private individuals to the

public disinvestment, what appears relevant in the face of the subsidiary nature of the

operations of capitalization of credit institutions with recourse to public investment.

On the other hand, the present amendment aims to introduce in the Act No. 63-A/2008, 24 of

november, a mandatory capitalization mechanism with recourse to public funds.

In that sense, the amendment comes to allow that, in boundary situations, and with the aim of

ensuring the stability of the national financial system, the Bank of Portugal may propose,

on substantiated terms, to the member of the Government responsible for the area of finance a

realization of a capitalization operation with recourse to public funds,

necessarily on a transitional basis, without the beneficiary credit institution present

a recapitalisation plan nor that it occurs in its approval by the Assembly

general.

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In effect, in certain excectional situations that are susceptible to constitute a

threat to financial stability, those legal requirements may constitute a

potential source of obstacles to the timing of capitalization of a credit institution that

is necessary to the safeguard of trust in the national financial system. Note, however,

whereas it is expressly established that the adoption of this measure is subject to the observance of

principles, particularly of suitability, necessity and proportionality, and once

demonstrated the insufficiency of the resource to the other intervention modalities provided for in the

law.

The mechanism ora introduced or others of similar consequences have been, incidentally,

peacefully recognized at the international level over the past few years, finding

reflection in the Proposal for a Directive of the European Parliament and of the Council on

recovery and resolution of credit institutions. Add that in some ordinances

legal from Member States of the European Union, as is the case with Spain and the

Germany, mandatory capitalization schemes have already been introduced by invoking the

public interests underlying the need for the adoption of such measures.

The stability of the financial system is essential for this to fulfill its functions,

particularly at the level of financing of economic activity, the provision of

means of payment and management of financial risks, as well as the protection of values

who are entrusted to you by the citizens and companies.

Finally, it is understood that the process of deliberation by the shareholders or associates,

particularly with regard to statutory changes necessary for access to those

regimes, should benefit from the same rules of procedural expeditions as they apply for

deliberations relating to the operations of capitalization and granting of personal guarantees of the

State, as these deliberations exclusively serve the purpose of viabilizing

those operations.

In this way, it intends to avoid that any statutory or legal requirements will make the

process of deliberation by the shareholders or associates in such a time-consuming manner that they may, in the

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practice, constitute an impediment to access by such institutions as to the regime of

public capitalization or the regime of personal guarantees of the state. This purpose

assures all the institutions of the system conditions for, on a level of equality, to be able

benefit from the instruments of financial stability.

Thus, it is still taken advantage of the ensejo to perfect some mechanisms of the regime of the

capitalization operations with recourse to public funds, as is the case with the faculty of

shareholders will acquire the shares of the state during the public investment period not

be possible in situations of materially relevant default of the plan of

recapitalisation, as well as to introduce improvements to the scheme applicable to the

procedures necessary to enable access to the regime of capitalization under the

Law No. 63-A/2008 of November 24 and the regime of the personal guarantees of the State to

shelter of Law No. 60-A/2008 of October 20.

The hearing was promoted by the Portuguese Association of Banks, the Bank of Portugal and the

European Central Bank.

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.

Object

This Law proceeds to the sixth amendment to the Act No. 63-A/2008 of November 24, which

establishes measures to strengthen the financial soundness of credit institutions within the framework of the

initiative for the enhancement of financial stability and the provision of liquidity in the

financial markets.

Article 2.

Amendment to Law No. 63-A/2008 of November 24

Articles 2, 10, 13, 16, 16, 24 and 25 of Law No 63-A/2008 of November 24,

go on to have the following essay:

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" Article 2.

[...]

1-[...].

2-The appeal to public investment is carried out in accordance, inter alia,

with principles of suitability, necessity and proportionality, of

remuneration and guarantee of capitals invested and minimization of risks

of distortion of the competition.

3-[...].

4-[...].

Article 10.

[...]

1-[...].

2-[...].

3-The provisions of the preceding paragraphs shall apply to the general meeting convened

to make the statutory changes necessary to allow access to the

public investment under this Law, particularly in the case

provided for in Article 3 (2), not being required by any other

prior or deliberative formalism, regardless of disposition

diverse from the law or the contract of society, with the exception of the provisions of the

article 34 of the General Regime of Credit Institutions and Societies

Financial, approved by the Decree-Law No. 298/92 of December 31.

Article 13.

[...]

1-Compete to the member of the Government responsible for the area of finance,

upon dispatch, decide on the realization of the capitalization operation and

fix its terms and conditions, having on the basis of the proposal for a decision that

be it for the effect remitted by the Bank of Portugal, according to the

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provisions of Article 12 (2), 3 and 4 of Article 12.

2-[...].

3-[...].

4-[...].

5-[...].

6-[...].

Article 16.

[...]

1-[...].

2-[...].

3-Should the Bank of Portugal appoint an interim administration and this

present a recapitalisation plan with recourse to public capitals that

is not approved in general assembly, the Bank of Portugal may propose,

on substantiated terms, to the member of the Government responsible for the area

of the finances, the realization of a mandatory capitalization operation of the

institution with recourse to public investment.

4-A realization of the mandatory capitalization operation provided for in the number

previous does not lack the respect for approval by the general assembly, nor of

any other legal or statutorily required procedure,

notably, in the event of an increase in the social capital of the institution, of the

respects deliberation by the general assembly, not by watching the shareholders

right of preference in subscribing to the capital.

5-In the proposal provided for in paragraph 3, the Bank of Portugal pronounces itself,

notably, on the financial and prudential situation and on the

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feasibility of the institution, as well as on the necessity of the realization of the

capitalization operation under the terms of the previous number, taking into account

the severity of the consequences of the potential deterioration of the situation

financial and prudential of the institution for the stability of the system

national financial, and still on the required amount, the forecasts of

return and the conditions of appropriate remuneration for public investment

and the terms and conditions of the public disinvestment.

6-A Decision on the realization of the mandatory capitalization operation and the

definition of its terms and conditions compete with the member of the Government

responsible for the area of finance, upon dispatch, which shall fix a

deadline for public disinvestment as well as assigning to shareholders of the

credit institution the faculty of acquiring the shares that the state

come to be a holder by virtue of the mandatory capitalization operation,

applying to the whole process, with the necessary adaptations, the willing

in Articles 13 to 15.

7-A Decision expected in the preceding paragraph is subject to the principles

set out in Article 2 (2) and produces immediate effect, conferring

the State the powers provided for in the subparagraphs a ), b ), c ) and and ) of the Article 1 (1)

next.

8-In the framework of cautionary procedures that have per object to

suspension of the effects of the decision provided for in paragraph 6, presumed, until proven

to the contrary, that the suspension of the efficacy would determine serious injury of the

public interest.

9-In a situation of indefable urgency, the Bank of Portugal may propose, in the

terms of the previous figures, the realization of an operation of

compulsory capitalisation with recourse to public investment, without

need for prior appointment of a provisional administration,

grounded in the need to ensure the stability of the system

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national financial and the objective inadequacy of the use of the other

modalities and procedures for intervention provided for in the law.

10-[ Previous Article No 3 ].

Article 16-The

[...]

1-In the event of materially relevant default of the plan of

recapitalization:

a) [...];

b) [...];

c) [...];

d) Cessa the faculty that assists the shareholders of the credit institution

to acquire the shares of which the State is the holder, provided for in paragraph 2 of the

article 24;

e) [ Previous point (d) ].

2-[...].

3-[...].

4-[...].

5-In case of carrying out a mandatory capitalization operation in the

terms of the previous article, the provisions of paragraphs 1 a to 4, with the exception of

of the paragraph d ) of paragraph 1.

Article 24.

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[...]

1-[...].

2-Without prejudice to the provisions of Article 16-A, if the capitalization operation

involves the participation of the State in the social capital of the credit institution,

during the entire period referred to in the preceding paragraph, he watches the

shareholders of the credit institution the faculty of acquiring the shares that the

State to be holder, in the measure corresponding to the participation of each

of those in the social capital of the credit institution at the date of the investment

public, to exercise in the terms and conditions set out in the order to which

refers to Article 13 (1).

Article 25.

[...]

1-[...].

2-[...].

3-[...].

4-[...].

5-The provisions of Article 10 shall apply to the general meeting convened for

proceed to the statutory changes necessary for the purposes of accessing the

regime of personal guarantees of the State under the provisions of the Act

n 60-A/2008 of October 20, in particular in the case provided for in paragraph 2

of Article 3.

6-At the economic boxes that benefit from state guarantees under the

provisions of Law No. 60-A/2008 of October 20 do not apply the provisions of

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in Article 4 of the Decree-Law No 136/79 of May 18. "

Article 3.

Alteration of epiggraft

The epiggrafe of Chapter IV of Law No. 63-A/2008 of November 24, passes to the following

essay:

" Chapter IV-Incompliance of the recapitalization plan and operations of

mandatory capitalization ".

Article 4.

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 January 31, 2013

The Prime Minister

The Deputy Minister and Parliamentary Affairs