Bank of Portugal Regulation no. 04/2021 which regulates the registration and organisation of branches and branch extensions

On the 7th June of 2021, Bank of Portugal published Bank of Portugal Regulation no. 04/2021 (hereinafter "Regulation no. 04/2021" or "Regulation"), which, along with the Legal Framework of Credit Institutions and Financial Companies, regulates the registration and organisation of branches and branch extensions.

This Regulation revokes Banco de Portugal Instruction 100/96 and aims to adapt the framework of these forms of banking and financial services taking into account new technological developments.

The Regulation is applicable to credit institutions, financial companies, payment institutions and electronic money institutions with registered offices in Portugal or abroad, which have branches in Portuguese territory (hereinafter "the Institutions").

This Regulation therefore regulates:

·        Thetypologies of branches;

·        Theframework applicable to branch extensions;

·        The information to be sent to the Bank of Portugal for the registration of branches

·        The requirements applicable to the sharing of spaces between institutions and between these and entities that carry out non-financial activity.

The rule set out in this diploma does not cover locations where banking and other financial transactions are carried out solely by automatic means, including, namely, banknote dispensing and processing machines.

Thus, branches may take the form of i) Fixed branches, when the activity is carried out in immovable property, namely in buildings, autonomous fractions, commercial spaces or stands installed in immovable property; ii) Mobile branches, when the activity is carried out in movable property, such as motor vehicles.

Branches may have extensions, the so-called "branch extensions", which are characterised by functional and operational dependence on the branch, and which are allowed to carry out all the operations which are carried out in the branch on which it is dependent. These may also take the form of two types: i) Fixed Branch Extension and ii) Mobile Branch Extension in accordance with the criterion already mentioned in relation to the branches. The commission associated with the provision of services and products in the branch extension may not be higher than the commission applied in the branches.

This Regulation also provides that the institutions that operate through this form of service provision must ensure that the branch office fully complies with the legal and regulatory rules applicable to the commercialisation of banking products and services, namely those relating to the complaints book, price list, minimum banking services, advertising, rules on the prevention of money laundering and the financing of terrorism, and mandatory security measures.

As for the sharing of space by several institutions, this Regulation establishes the requirements to be met by the institutions, which must essentially ensure that their customer service area has technical, material and advertising means that guarantee the exclusive use by the institution itself and the clear identification of the acting institution.

If the institutions intend to share technical, material, advertising and human resources, they must dully communicate their intention to Banco de Portugal, which may oppose it within 45 days of that communication, duly filed in, if it finds that this raises irreparable conflicts of interest or if it is not shown by the institution that it can ensure the continuity of its activity if the sharing of resources ceases.

This Regulation also provides that institutions have 3 years to adapt their current model to the rules on sharing of space and means foreseen in this Regulation. During this period, institutions shall communicate to Banco de Portugal the situations in which they share technical, material, advertising and human resources, in the context of space sharing, so that Banco de Portugal may issue an opinion under the terms referred to above.

In addition, within 45 days of the entry into force of this Regulation, the institutions must send Banco de Portugal the information necessary for the registration of the branches and branch extensions, namely:

·        Hours of operation

·        Itinerary;

·        Whether it is sharing space with other financial or non-financial entities, if
applicable;

·        In the case of the branch extensions, the list of operations to be carried out and the detailed description of the functional and operational dependency in
relation to the branch on which it depends.

For this purpose of the initial communication, information relating to more than one branch extension may be aggregated, provided that the notification contains all the compulsory elements on each branch extension.

To access the full text of Regulation no.04/2021, please click here.