2012/409/EU: Council Implementing Decision of 10 July 2012 amending Implementing Decision 2011/344/EU on granting Union financial assistance to Portugal

‘8 With a view to restoring confidence in the financial sector, Portugal shall adequately recapitalise its banking sector and ensure an orderly deleveraging process. In that regard, Portugal shall implement the strategy for the Portuguese banking sector agreed with the Commission, the ECB and the IMF so that financial stability is preserved. In particular, Portugal shall: (a) advise banks to strengthen their collateral buffers on a sustainable basis and monitor the issuance of the government guaranteed bank bonds, which has been authorised up to EUR 35 billion in line with Union State aid rules; (b) ensure that banks reach the Programme target of the Core Tier 1 ratio of 10 % at the latest by the end of 2012. The capital requirements stemming from valuing sovereign debt based on market prices according to the Union wide recapitalisation exercise coordinated by the European Banking Authority shall be met in June 2012 together with the capital implications resulting from the special on-site inspections programme and the transfer of the banks’ pension funds to the State social security system. If banks cannot reach the capital requirement thresholds within the deadlines set, the EUR 12 billion bank solvency support facility established under the Programme shall be made available; (c) ensure a balanced and orderly deleveraging of the banking sector, which remains critical to eliminating funding imbalances on a permanent basis. Banks’ funding plans aim at reducing the loan-to-deposit ratio to an indicative value of around 120 % by the end of the Programme and potentially reducing the reliance on Eurosystem funding for the duration of the Programme. Those funding plans shall be reviewed quarterly; (d) ensure that the state-owned CGD is streamlined to increase the capital base of its core banking arm as needed. The sale of its insurance and health arms shall take place before the end of 2012, while the sale of non-strategic equity stakes is ongoing. In so far as these needs cannot be met from internal group sources by the end of June 2012, CGD shall be provided with government capital support from cash buffers outside the bank solvency support facility; (e) optimise the process for recovering the assets transferred from BPN to the three state-owned special purpose vehicles through the outsourcing to a professional third party of the management of the assets, with a mandate to gradually recover the assets over time. The Portuguese government shall select the party managing the assets through a competitive bidding process and include proper incentives to optimise the recoveries into the mandate; (f) complete a proposal for encouraging the diversification of financing alternatives to the corporate sector by the end of July 2012; (g) implement measures to conclude the setting-up of the Resolution Fund with a view to ensuring that it is fully operational by July 2012; adopt the supervisory notices on recovery plans by the end of July 2012; adopt the regulation on resolution plans by the end of October 2012; and adopt the rules applicable to the setting-up and operation of bridge banks in line with Union competition rules by the end of September 2012. Priority shall be given to the review of the recovery and subsequent resolution plans of the banks that are of systemic importance; (h) establish a framework for financial institutions to engage in out-of-court debt restructuring for households and SMEs.’.

This Decision is addressed to the Portuguese Republic.