Bank of Portugal tightens up on high-risk client management

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The Bank of Portugal, which regulates and supervises Portugal’s banking network, is tightening up the rules and regulations that govern the way that Portugal’s banks deal with high-risk clients.

It has sent a round-robin letter to the managing directors of all Portugal’s financial institutions requiring them to define their internal rules and regulations that govern clients which they consider high-risk.
The move is to prevent the kind of reckless lending involving hundreds of million of euros that took place at several major banks, including State bank Caixa Geral de Depósitos and mutual bank Montepio over the past decade, the latest example being the €125 million lent to disgraced Angola businesswoman Isabel dos Santos which came to light earlier this year in the wake of Luanda Leaks.
Now, under new rules, if there are failures to secure adequate guarantees in lieu of loans, and the loans go bad, the higher echelons of Portugal’s bank administrators will be held responsible according to Jornal de Negócios.
Seeking to avoid the kind of losses seen in the past, the regulator has ordered each of the banks to present internal rules which define which of its clients are considered high-risk.
These rules will be defined by the board of directors of each bank and presented to the Bank of Portugal by 30 June.
In future, if there are situations in which the banks incur losses, taking into account that it will now be the managers of the banks who now define which clients are high-risk and which are not, they will be called upon to justify the decisions taken over loans and loan restructuring.