FINANCE AND CAPITAL MARKETS NEWSLETTER 4 th Quarter of 2015 I Portuguese Treasury Floating Rate Bonds 2 II Legislation A. Banking Law: Institutional and Material B. Insurance law: Institutional and Material C. Securities and Capital Markets 3 5 6 III Relevant Court Decisions 8 NEWSLETTER I FINANCE AND CAPITAL MARKETS WWW.CUATRECASAS.COM NEWSLETTER I FINANCE AND CAPITAL MARKETS 2/10 FINANCE AND CAPITAL MARKETS NEWSLETTER I PORTUGUESE TREASURY FLOATING RATE BONDS A new Portuguese debt instrument has been created, capable of being marketed in the retail market: the Portuguese Treasury Floating Rate Bonds (“TFRB’s”). The TFRB are regulated by the Cabinet Resolution no. 86/2015 and by the Instruction no. 1-A/2015 of the Portuguese Treasury and Debt Management Agency (“IGCP”). i. TFRB’s: what are they? The TFRB’s are a new way of Treasury bonds, which can be distributed in the retail market by credit institutions, either individually or organized under a consortium. They are bookentry securities representing the Portuguese public debt, with a maturity of up to 10 years, which distinguishes them from the Treasury bills. The aspect that sets them apart from other Treasury bonds is that they can be placed in the retail market. Whilst they are a way of diversifying the sources of funding of the Portuguese State, at the same time they encourage savings at national level amongst small investors. ii. Nominal value, maximum amount of application and rate of interest The TFRB’s are issued in Euros, the interest rate must be variable (unlike normal Treasury bonds) and have a nominal value of 1,000.00 EUR each, precisely to allow for distribution to the retail and small investors. In the primary market, and to allow a dispersion of your subscription, the individual ceiling to subscribe is 1000 bonds. Therefore, this means that the maximum individual subscription will be of 1,000,000.00 EUR. The number of subscription orders that can be given by each investor, as well as the criteria for apportionment of TFRB’s when the demand exceeds the number of bonds issued, are defined by the IGCP in conjunction with the credit institution(s). We also emphasize that TFRB 's are governed by collective action clauses (commonly known as CAC’s), whose terms of reference were approved by the Economic and Financial Committee of the European Union on November 18, 2011. iii. Placement and subscription The TFRB 's offering can be singular or in series, and can be placed to investors either by a credit institution or by a consortium of credit institutions, as determined by IGCP, who can provide instructions to the credit institution(s) in connection with the organization and/or the placement functions towards the issue of TFRB's. WWW.CUATRECASAS.COM NEWSLETTER I FINANCE AND CAPITAL MARKETS 3/10 Credit institutions are, however, subject to a set of specific duties aimed mainly to the successful placement of TFRB's and the regular trading of the same in the secondary market. iv. TFRB redemption and admission to trading TFRB can be issued for a term of up to 10 years and its redemption shall be paid in full, at the nominal value, at the maturity date. Neither the State nor the bondholders may require the early redemption, partial or total, of the at TFRB's. In order to ensure some liquidity to the bondholders in connection with such investment, the intention is that TFRB's are admitted to trading on Euronext Lisbon or another regulated market authorized in Portugal. II LEGISLATION A. Banking Law: Institutional and Material Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 On payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No. 1093/2010, and repealing Directive 2007/64/EC. Commission Implementing Regulation (EU) 2015/2326 of 11 December 2015 On the extension of the transitional periods related to own funds requirements for exposures to central counterparties set out in Regulation (EU) no. 575/2013 and Regulation (EU) no. 648/2012 of the European Parliament and of the Council. Guideline (EU) 2015/1938 of the European Central Bank of 27 August 2015 Amending Guideline (EU) 2015/510 of the European Central Bank on the implementation of the Eurosystem monetary policy framework (ECB/2015/27). Decision (EU) 2015/2202 of the European Central Bank of 19 November 2015 Amending Decision ECB/2010/23 on the allocation of monetary income of the national central banks of Member States whose currency is the euro (ECB/2015/37). European Central Bank Recommendation of the European Central Bank of 17 December 2015, with regard to credit institutions paying dividends in 2016 for the financial year 2015, under which the credit institutions should establish dividend policies using conservative and prudent assumptions in order, after any distribution, to satisfy the applicable capital requirements. WWW.CUATRECASAS.COM NEWSLETTER I FINANCE AND CAPITAL MARKETS 4/10 Ministerial Order no. 362/2015 – Official Gazette no. 202/2015, Series I of september 15, 2015 Ninth amendment to the Ministerial Order no. 95/94, of February 9, which fixed the minimum capital of credit institutions and financial companies, establishing the following amounts: (i) banks and savings banks — € 17 500 000; (ii) investment companies — € 5 000 000; (iii) leasing companies — € 3 000 000, if their sole corporate purpose is equipment finance lease, or € 5 000 000, in all other cases; (iv) credit financial institutions — € 7 500 000; and (v) annexed saving banks — € 1 000 000. Bank of Portugal Notices Notice no. 3/2015, which has entered into force on October 11, 2015, defines the procedures related to the submission, maintenance and review of recovery plans, as well as other additional rules necessary for the implementation of article 116-D General Regime for Credit Institutions and Financial Companies, approved by the Decree-Law no. 298/92, of December 31, specifying the procedures for determining simplified obligations in the preparation and reporting of recovery plans and exercising the option of waiving the recovery plans provided for in paragraph 3 of article 116-E of the Legal Framework. Notice no. 4/2015, which has entered into force on December 30 2015, setting out the essential elements to disclose by the Bank of Portugal regarding the identification of other systemically important institutions (O-SII’s) and the reserve applies to each institution, determining the frequency of that disclosure, as well the exceptional situations that may justify changing this periodicity. Notice no. 5/2015, which has entered into force on December 31, 2015, extends to all entities subject to supervision of Bank of Portugal the obligation to go to prepare the financial statements on an individual basis and on a consolidated basis, as applicable, in accordance with international accounting standards, repealing the Notices no. 3/95 and 1/2005, as well the Instructions no. 4/96 and 71/96. Bank of Portugal Instructions Instruction no. 16/2015, which has entered into force on October 2, 2015, on the framework of the implementation of monetary policy of the Eurosystem. Instruction no. 17/2015, which has entered into force on January 1, 2016, on the disclosure of the maximum rates applicable to credit agreements for consumers in the 1st quarter of 2016. Bank of Portugal Circular Letters Circular Letter no. 1/2016/DMR, of October 18, 2015, informing about new notification deadlines of the amount of minimum reserves (monthly reporting) as well as the calendar of maintenance periods for 2016 (including the last period of 2015). WWW.CUATRECASAS.COM NEWSLETTER I FINANCE AND CAPITAL MARKETS 5/10 Circular Letter no. 2/2016/DMR, of October 18, 2015, informing about new notification deadlines of the amount of minimum reserves (quarterly report) as well as the calendar of maintenance periods for 2016 (including the last period of 2015). Circular Letter no. 4/2015/DET, of October 12, 2015, disclosing the names of companies that, provided the required conditions are fulfilled, remain entitled to pursue the recirculation of banknotes and coins of euro. Circular Letter no. 85/2015/DES, of October 3, 2015, providing information about the accounting treatment of contributions to the Resolution Fund. Circular Letter no. 99/2015/DSP, of October 25, 2015, announced that from 1 January 2016 onwards the evaluation of the adequacy of the ROC/SROC (certified public accountant/ statutory auditor) who, although part of the supervisory structure of the institutions, are not members of the respective supervisory body, will be made by the CMVM (Securities Market Commission). B. Insurance Law: Institutional and Material Commission Delegated Decision (EU) 2015/2290 of 12 June 2015 On the provisional equivalence of the solvency regimes in force in Australia, Bermuda, Brazil, Canada, Mexico and the United States and applicable to insurance and reinsurance undertakings with head offices in those countries. Commission Implementing Regulation (EU) 2015/2012 of 11 November 2015 Laying down implementing technical standards with regard to the procedures for decisions to set, calculate and remove capital add-ons in accordance with Directive 2009/138/EC of the European Parliament and of the Council. Commission Implementing Regulation (EU) 2015/2014 of 11 November 2015 Laying down implementing technical standards with regard to the procedures and templates for the submission of information to the group supervisor and for the exchange of information between supervisory authorities in accordance with Directive 2009/138/EC of the European Parliament and of the Council. Commission Implementing Regulation (EU) 2015/2015 of 11 November 2015 Laying down implementing technical standards on the procedures for assessing external credit assessments in accordance with Directive 2009/138/EC of the European Parliament and of the Council. Commission Implementing Regulation (EU) 2015/2016 of 11 November 2015 Laying down the implementing technical standards with regard to the equity index for the symmetric adjustment of the standard equity capital charge in accordance with Directive 2009/138/EC of the European Parliament and of the Council. WWW.CUATRECASAS.COM NEWSLETTER I FINANCE AND CAPITAL MARKETS 6/10 Commission Implementing Regulation (EU) 2015/2017 of 11 November 2015 Laying down implementing technical standards with regard to the adjusted factors to calculate the capital requirement for currency risk for currencies pegged to the euro in accordance with Directive 2009/138/EC of the European Parliament and of the Counci (Solvency I). Commission Implementing Regulation (EU) 2015/2451 of 2 December 2015 Laying down implementing technical standards with regard to the templates and structure of the disclosure of specific information by supervisory authorities in accordance with Directive 2009/138/EC of the European Parliament and of the Council (Solvency II). Commission Implementing Regulation (EU) 2015/2450 of 2 December 2015 Laying down implementing technical standards with regard to the templates for the submission of information to the supervisory authorities according to Directive 2009/138/EC of the European Parliament and of the Council. Commission Implementing Regulation (EU) 2015/2452 of 2 December 2015 Laying down implementing technical standards with regard to the procedures, formats and templates of the solvency and financial condition report in accordance with Directive 2009/138/EC of the European Parliament and of the Council (Solvency II). Ministerial Order no. 403-A/2015 – Official Gazette no 223/2015, 1st Supplement, Series I of October 13, 2015 Sets forth the minimum conditions applicable to third party liability insurance required under articles 54, paragraph 4 and 55, paragraph 2 of the legal regime approved by Law no 98/2015, of August 18. ASF Regulation no. 6/2015-R – Official Gazette no. 254/2015, Series II of December 30, 2015 ASF Regulation no. 6/2015, of December 17 – In compliance with the New Portuguese Legal Regime on the taking-up and pursuit of the business of Insurance and Reinsurance, approved by the Law no 147/2015, of September 9, governs the applications for approval of the use of quantitative requirements. C. Securities and Capital Markets Commission Delegated Regulation (EU) 2015/2303 of 28 July 2015 Upplementing Directive 2002/87/EC of the European Parliament and of the Council with regard to regulatory technical standards specifying the definitions and coordinating the supplementary supervision of risk concentration and intra-group transactions. Regulation (EU) 2015/2365 of the European Parliament and of the council of 25 November 2015 On transparency of securities financing transactions and of reuse and amending Regulation (EU) no. 648/2012. WWW.CUATRECASAS.COM NEWSLETTER I FINANCE AND CAPITAL MARKETS 7/10 Decision (EU) 2015/2464 of the European Central Bank of 16 December 2015 Amending Decision (EU) 2015/774 on a secondary markets public sector asset purchase programme (ECB/2015/48). Commission Delegated Regulation (EU) 2015/1798 of 2 July 2015 Correcting Delegated Regulation (EU) no. 625/2014 supplementing Regulation (EU) no. 575/2013 of the European Parliament and of the Council by way of regulatory technical standards specifying the requirements for investor, sponsor, original lenders and originator institutions relating to exposures to transferred credit risk. European Economic and Social Committee Opinion of the European Economic and Social Committee on investor protection and investor to state dispute settlement in EU trade and investment agreements with third countries. This opinion can be found at www.eur-lex.europa.eu/legalcontent/PT/TXT/?uri=CELEX:52014IE5356. European Economic and Social Committee Opinion of the European Economic and Social Committee on the “Green Paper on Building a Capital Markets Union”. This opinion can be found at www.eur-lex.europa.eu/legalcontent/PT/TXT/?uri=CELEX:52015AE1333. Decision (EU) 2015/2101 of the European Central Bank of 5 November 2015 Amending Decision (EU) 2015/774 on a secondary markets public sector asset purchase programme (ECB/2015/33). Decree-Law no. 225/2015 – Official Gazette no. 198/2015, Series I of September 9, 2015 Proceeds to the establishment of the Equity or Quasi-Equity Fund, managed by EDFI - European Development Financial Institution, and devoted to the creation or strengthening of financial instruments to capitalize companies using the European structural and investment funds. Decree-Law no. 226/2015 – Official Gazette no. 198/2015, Series I of September 9, 2015 Proceeds to the establishment of the Debt and Guarantees Fund, managed by EDFI - European Development Financial Institution, and devoted to the creation or strengthening of financial instruments to capitalize companies using the European structural and investment funds. Order no. 13728-E/2015 – Official Gazette no. 231/2015, 1st Supplement, Series II of October 25, 2015 Authorizes the Agency for Development and Cohesion, to take on the quality of participating entity in the Equity or Quasi-Equity Fund and Debt and Guarantees Fund. WWW.CUATRECASAS.COM NEWSLETTER I FINANCE AND CAPITAL MARKETS 8/10 Regulation no. 3/2015 (Securities Market Commission) – Official Gazette no. 215/2015, Series II of October 3, 2015 Regulation no. 3/2015 (Securities Market Commission) – Venture Capital, Social Entrepreneurship and Specialize Alternative Investment (Repeal Regulation no. 1/2008). III RELEVANT COURT DECISIONS Supreme Court of Justice, Decision of November 17, 2015, Procedure no. 1122/12.0 They are subject to the legal framework of general contractual terms and conditions the clauses drawn up by the lessor without prior individual negotiation and whose contents the potential recipients cannot influence, designed to be included in leasing contracts. As such, in the light of that regime, in particular the articles 18, subparagraph c) and 21, subparagraph h), are null and prohibited, for breach of the contractual good faith prescribed in article 15, clauses in those conditions and combined with each other, provide as follows: (i) the lessee cannot require the suspension of performance of its obligations if he is unable to use the rented asset for reasons beyond lessor’s control; (ii) it is the Lessee’s responsibility to promote the registration, where applicable, as well ws to perfect the enrollment or administrative licenses, and it cannot use rented asset without having complied with the requirements set forth for that purposes. Supreme Court of Justice, Decision of October 8, 2015, Procedure no. 360/12.0 The defendant insurer that intends to defend itself by arguing the exception of the exhaustion of the insured amount with the payments made to other injured parties, must plead and prove that he has made the payments in question in good faith or reasonably ignoring the existence of others injured parties, in compliance with the provisions of article 16, paragraph 2 of Decree-Law no. 522/85, of 31 December (compulsory motor vehicle liability insurance). Porto Court of Appeal, Decision of October 13, 2015, Procedure no. 447/13.2 Under a public work contract, the contractor was obliged to contracting with a bank a first demand guarantee under which the guarantor was responsible for "making the delivery to the beneficiary of any amounts that, up to the amount of said latter [59,824.15 EUR], it may be claimed, if the contractor fails to fulfill its contractual obligations (...) ". Under this guarantee, the contractor guarantees, endorsing one blank promissory note delivered to the bank, which would be responsible for repaying the amount that this would be paid in fulfillment of its guarantee. The sub judice issue, as defined by the Court, does not have to do with the nature of the provided bank guarantee, but rather whether there was a valid and effective demand to fulfill this guarantee. Firstly, in the light of the Court's understanding, the amount claimed by the construction owner to the bank must be a specifically identified amount, quantified and justified in the demand. WWW.CUATRECASAS.COM NEWSLETTER I FINANCE AND CAPITAL MARKETS 9/10 The Court’s interpretation in light of the above, was that it didn’t happen, once the construction owner, through a demand addressed to the bank, by virtue of eventual contractual breaches and defects in the work, did not mention which was the value of the repairs to be made, and accordingly of the amount intended to receive. That said, the bank delivered, without further ado, the entire amount guaranteed, without having been informed of the concrete desired amount. The Court concluded that the payment made by the bank was untimely, premature and unjustified, once it considered that "there was no formal notice for payment.". Having said that, and because of the subsequent filling of the promissory note delivered to the bank to guarantee the repayment of the amount granted to the construction owner, the Court found it abusive, because it has been in default of the guarantee agreement. Porto Court of Appeal, Decision of October 13, 2015, Procedure no. 4258/13.7 There were two main controversial issues analyzed by this Decision. Under a Long-Term Rental contract ("LTR"), the lessee gave to the bank a blank promissory note, which subsequently was filled by the bank pursuant to an agreement for the filling of such enforceable title. In order to prevent the enforcement procedure, the lessee must demonstrate that the filling of the promissory note was abusive, as made in default of the filling agreement. However, the lessee has argued the nullity of the LTR contract, and therefore has considered that he would no longer be required to argue the breach of said agreement. The Court, however, decided in a different sense, as it has considered that there is no cause of nullity of the contract, as no error affects the effectiveness and validity of the instrument. The second issue has to do with the fulfillment, or not, of the information obligations by the bank, in accordance with the legal regime applicable to general contractual terms and conditions and the rules governing the credit agreements for consumers, once the Court considered that the LTR contract in question qualified, according to that legislation, as an adhesion contract. Although the case law have come to understand that the law should not be considered sufficiently satisfied with a mere "communication" of the general conditions of an adhesion contract, requiring the reporting is done in able terms to provide to consumers the possibility of a complete knowledge and manpower of clauses, the rules governing the credit agreements for consumers impose, in compliance with the rules thereof, the delivery to the consumers of the Information Sheet on Credit Matters to Consumers. Having said that, the Court concludes that makes proof of that obligation the subscription of the document in which the consumer declares that it has read the Information Sheet in Respect of Credit to Consumers and the draft of the LTR contract, which contains the contract terms and conditions of the proposal and where he acknowledges that he should only sign the credit agreement in case he considers to have been properly informed and clarified of all contractual terms and conditions as well as of the consequences in case of WWW.CUATRECASAS.COM NEWSLETTER I FINANCE AND CAPITAL MARKETS 10/10 breach of said terms and conditions, and provided a copy thereof has been handed over to him. CONTACT CUATRECASAS, GONÇALVES PEREIRA & ASSOCIADOS, RL Sociedade de Advogados de Responsabilidade Limitada LISBOA Praça Marquês de Pombal, 2 (e 1-8º) I 1250-160 Lisboa I Portugal Tel. (351) 21 355 3800 I Fax (351) 21 353 2362 firstname.lastname@example.org I www.cuatrecasas.com PORTO Avenida da Boavista, 3265 – 5.1 I 4100-137 Porto I Portugal Tel. (351) 22 616 6920 I Fax (351) 22 616 6949 email@example.com I www.cuatrecasas.com This Newsletter was prepared by Cuatrecasas, Gonçalves Pereira & Associados, RL for information purposes only and should not be understood as a form of advertising. The information provided and the opinions expressed herein are of a general nature and should not, under any circumstances, be a replacement for adequate legal advice for the resolution of specific cases. Therefore, Cuatrecasas, Gonçalves Pereira & Associados, RL is not liable for any possible damages caused by its use. Access to the information provided in this Newsletter does not imply the formation of a lawyer-client relationship or of any other sort of legal relationship. 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