Banco de Portugal Public Consultation No. 06/2021 – prevention and out-of-court settlement of defaults (PARI and PERSI)

Legal alert no. 166

On 8 of September, Banco de Portugal (hereinafter "BoP") placed in public consultation the Draft of the Notice and Instruction on the prevention and out-of-court settlement of default situations.

The publication of the public consultation under analysis follows the approval of Decree-Law 70-B/2021 of 6 August, which amends Decree-Law 227/2021 of 25 October (hereinafter "DL 227/2021") on the principles and rules to be observed by credit institutions in the monitoring of situations of risk of non-compliance and in the out-of-court settlement of breaches of obligations under credit agreements concluded with banking customers.

The amendments introduced in Decree-Law 227/2021 are intended to: establish protective measures for bank customers with credit contracts covered by bank moratoria in view of the transitional and exceptional regime, as well as to strengthen the obligations of these institutions under the Action Plan for Default Risk (hereinafter "PARI") and the Out-of-Court Procedure for Settlement of Defaults (hereinafter "PERSI");

Therefore, the regulations currently in force need to be updated, and the publication of the Notice and Instruction will repeal the BP Notice 17/2012 and Instruction 44/2021, respectively, which cover several aspects of the regime.

We highlight below the main aspects under consideration by the BoP:

• The duty to disclose to the public information on breach of credit agreements and the extrajudicial support network for bank customers;
• The procedures to be implemented by institutions within the scope of the preparation and application of the PARI and the application of the PERSI;
• The minimum regularity with which institutions should carry out diligences to identify signs of deterioration in the financial capacity of bank customers;
• The provision of information to bank customers during the PERSI;
• Reporting to the BoP of PARI and of the internal document describing the procedures adopted within the scope of the implementation of the PERSI.
• Report to the BoP on the communication of quantitative information on the implementation of PARI and PERSI procedures, namely, the information requirements to be reported by institutions and the model to be followed.

The public consultation runs until 21 October 2021 and interested parties should send their contributions to the email consultas.publicas.dsc@bportugal.pt, with the indication in Subject "Response to Public Consultation No. 6/2021".

These contributions will be published by the BoP unless expressly opposed by interested parties.

The explanatory note of the public consultation may be accessed here.

The draft BoP Notice and Instruction can be accessed here and here, respectively.