Although full implementation of the Markets in Financial Instruments Directive II (Mifid II) in Portugal is expected to occur very soon, the truth is that market players already hold sufficient tools and comply with enough EU regulations to assess internal policies and procedures to make them compliant with the Mifid II requirements.
Although both the draft Mifid II implementation bill and the public consultation report prepared by the National Council of Financial Supervisors (Report) signal that the Portuguese legislator will refrain from substantial gold-plating in what concerns the implementation of Mifid II, the Portuguese Securities Commission (CMVM) publicly acknowledged and underlined, during last month's parliamentary commission hearing, that certain recent cases would remain in the minds and on the agendas of Portuguese financial supervisors, and their duty would be to prevent a repeat of those events and to make good use of the additional powers granted by the Mifid II. Those recent cases included: (i) the nationalisation of Banco Português de Negócios (BPN, a medium-sized retail bank); (ii) the liquidation of Banco Privado Português (BPP, a small investment bank); (iii) the resolution of Banco Espírito Santo (BES) resulting in the creation of Novo Banco, subsequently acquired by Lone Star; and, (iv) the resolution of BANIF (a small bank with a substantial market share in Madeira and Azores, whose assets and liabilities were generally acquired by Santander's Portuguese affiliate).
This means that although no substantial enhancements were particularly expected in the transposition, the practical implementation of Mifid II by Portuguese supervisors may reveal, in some cases, a stricter approach than what was anticipated. An example of this could be the stricter approach by Portuguese supervisors in areas concerning inducements and product governance. In light of the all too recent BES and BANIF scandals and related complaints of financial product misplacement, the Report is clear in pointing out the financial supervisors' intention – concerning inducements – to cover all types of benefits received either directly or indirectly (by way of a withholding of third party commissions), as well as their understanding – concerning product governance – that banking products (deposits and loans) should be subject to strict governance duties and procedures to ensure their suitability and adequacy to clients' needs.
A further example of the supervisors' strict approach is evidenced by their initial intention to prevent the sale of financial products in markets different from those for which they were originally conceived (against Esma guidelines on product governance to safeguard investors). Despite the Report foreseeing that this last feature will be erased from the final version of the bill, it signals the approach one may expect from the Portuguese supervisors.
In view of the above, market players should prepare for these new times, where remuneration and commission policies and third-party payments will be subject to strict surveillance alongside financial product production and placement. In a market such as Portugal, where financial intermediaries are smaller in number and size, cost effective solutions will be in heavy demand to avoid regulatory measures taking their toll on business.
|Márcio Carreira Nobre||Diogo Damião|