Economy and Banking Sector of Portugal

Location Southwestern Europe
Population (2016)10 341 330 ↓ (0.00%)
EU Status member since 1986
Economy
National Currency EUR (Euro) since 1 January 1999
GDP 
    Nominal GDP (2015)179.4 bln EUR ↑ (+0.04%)
    Nominal GDP per Capita (2015)17 300 EUR ↑ (+0.04%)
    Real GDP Growth (2015)1.5 % ↑ (2014: 0.9 %)
Inflation Rate 
    CPI, MoM (Sep 2016)0.7 % ↑ (Aug 2016: 0.0 %)
    CPI, YoY (Sep 2016)0.7 % ↓ (Aug 2016: 0.8 %)
    CPI, Year Average (2015)0.5 % ↑ (2014: -0.2 %)
Unemployment Rate (2015)12.6 % ↓ (2014: 14.1 %)
Government Bond Yield (Sep 2016)3.26 % ↑ (Aug 2016: 2.91 %)
Credit Ratings (as of Sep 2016)
    FitchBB+ speculative, outlook stable
    Moody'sBa1 non-investment grade speculative, outlook stable
    S&PBB+ non-investment grade speculative
Taxation
Double Taxation Agreements 67 signed agreements
Information Exchange 
    Exchange on Request 16 signed agreements
    Automatic Exchange starts in September 2017
FATCA IGA in effect since 06 August 2015, Model 1
Banking Sector
Financial Market Development 3.3 (max 7.0) rank: 116th out of 138 countries
    Banks' Soundness 3.3 (max 7.0) rank: 129th out of 138 countries
Banking Industry Country Risk 7(1 - lowest risk, 10 - highest risk)
    Economy Risk 7
    Industry Risk 6
Deposit Guarantee Scheme 
    Maximum Protected Amount 100 000 EUR
Country Ceiling for Deposits 
    Local Currency (Euro)A1 upper medium grade
    Foreign CurrencyA1 upper medium grade
Deposit Rates (Aug 2016, EUR)0.36 % ↓ (Jul 2016: 0.37 %)
Banking Sector Structure 
    Number of Banks150
    Recent Changes (2015) new banks: 1, closed banks: 4
    Consolidated Assets (2015) 408.12 bln EUR ↓ (-4.19%)
Major Banks
 Caixa Geral de Depositos, SA  Banco BPI, SA
 Banco Comercial Portugues, SA (BCP or Millennium BCP)  Banco Santander Totta, SA
 Banco Espirito Santo, SA
 List of Banks in Portugal

Portuguese Economy

National Currency

Portugal joined the Euro Area on 1 January 1999.

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GDP

According to Eurostat, nominal GDP of Portugal in 2015 was 179.4 bln EUR.

Portugal underperforms the European Union in terms of real GDP growth with the average annual differential coming to -0.8% over the past 10 years (2005 - 2015). In 2015 real GDP growth was 1.5% which was below the Euro Area average (1.6%) and below the European Union average (1.9%). Real GDP growth in 2016 - 2021 are IMF's estimates.

Real GDP Growth in Portugal.
Chart 1. Real GDP Growth in Portugal. Source: Eurostat, International Monetary Fund.

In 2015, nominal GDP per capita in Portugal was 17 300 EUR.

Portugal has a below-average level of wealth in terms of per-capita GDP at purchasing power parity (PPP); this economic welfare indicator has, on average, fell behind that of the European Union by -23.4% over the past 10 years (2005 - 2015). GDP per capita at PPP in 2016 - 2021 are IMF's estimates.

GDP Per Capita at Purchasing Power Parity in  Portugal; European Union = 100.
Chart 2. GDP Per Capita at Purchasing Power Parity in Portugal; European Union = 100.
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Inflation Rate

According to Eurostat, inflation rate in Portugal in 2015 expressed as annual percentages of average consumer prices was 0.5% which was above the Euro Area average (0.0%) and above the European Union average (0.0%). Inflation rates in 2016 - 2021 are IMF's estimates.

Inflation Rate in Portugal.
Chart 3. Inflation Rate in Portugal. Source: Eurostat, International Monetary Fund.
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Taxation in Portugal

Double Taxation Agreements

Double Taxation Agreement (DTA) is an agreement between two or more countries for the avoidance of double taxation.

Portugal signed DTAs which already came info force with the following jurisdictions (for agreements which came into force after 01 January 2013 the date of coming into force is given in brackets):

 Algeria
 Austria
 Belgium
 Brazil
 Bulgaria
 Canada
 Cape Verde
 Chile
 China
 Cuba
 Cyprus (Aug 2013)
 Czech Republic
 Denmark
 Estonia
 Finland
 France
 Germany
 Greece
 Guinea-Bissau
 Hong Kong
 Hungary
 Iceland
 India
 Indonesia
 Ireland
 Israel
 Italy
 Japan (Jul 2013)
 Korea, Republic of
 Kuwait (Dec 2013)
 Latvia
 Lithuania
 Luxembourg
 Macau
 Malta
 Mexico
 Moldova, Republic of
 Morocco
 Mozambique
 Netherlands
 Norway
 Pakistan
 Panama
 Peru (Apr 2014)
 Poland
 Qatar (Apr 2014)
 Romania
 Russian Federation
 Singapore
 Slovakia
 Slovenia
 South Africa
 Spain
 Sweden
 Switzerland
 Tunisia
 Turkey
 Ukraine
 United Arab Emirates
 United Kingdom
 United States
 Uruguay
 Venezuela

There are also several agreements between Portugal and other jurisdictions which were signed but haven't yet come into force (for agreements signed after after 01 January 2013 of signing the agreement is given in brackets):

 Barbados
 Colombia
 Georgia
 San Marino
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Information Exchange

There are 3 ways for jusrisdictions to exchange information on tax matters:

  • spontaneously;
  • on request;
  • automatically.

Tax Information Exchange Agreements (TIEAs) enable exchange of information on request relating to a specific tax investigation, either criminal or civil.

Portugal signed TIEAs which already came info force with the following jurisdictions (for agreements which came into force after 01 January 2013 the date of coming into force is given in brackets):

 Andorra
 Bermuda
 Cayman Islands
 Gibraltar
 Isle of Man
 Jersey
 Saint Lucia
 Turks and Caicos Islands

There are also several agreements between Portugal and other jurisdictions which was signed but haven't yet come into force (for agreements signed after 01 January 2013 of signing the agreement is given in brackets):

 Anguilla
 Antigua and Barbuda
 Belize
 British Virgin Islands
 Dominica
 Guernsey
 Liberia
 Saint Kitts and Nevis

Automatic information exchange allows jurisdictions to exchange information automatically, without having a specific tax investigation.

Portugal signed the automatic information exchange agreement on 29 October 2014 and committed to start the automatic information exchange in September 2017.

Further Information:
Automatic Exchange of Information on Financial Accounts
Countries Which Will Not Automatically Exchange Account Information

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FATCA

Foreign Account Tax Compliance Act (FATCA) which became law in the United States in March 2010, focuses on reporting made by foreign financial institutions about financial accounts held by US taxpayers or foreign entities in which US taxpayers hold a substantial ownership interest. The FATCA-reporting is facilitated by Intergovernmental Agreements (IGAs).

Portugal has FATCA agreement with the U.S. in effect since 06 August 2015 (Intergovernmental Agreement Model 1). Financial institutions operating in Portugal are required to identify U.S. taxpayers by January 1, 2017 and to report the information for 2017 and the subsequent years. The agreement is reciprocal: Portuguese financial accounts hold in U.S. financial institutions will be reported to Portuguese authorities.

Further Information:
FATCA and European countries

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Portuguese Banking Sector

Financial Market Development

According to World Economic Forum's Global Competitiveness Report 2016-2017, financial market development in Portugal is scored 3.3 out of maximum 7.0 and ranked 116th out of 138 analysed economies. Soundness of banks is scored 3.3 bringing Portugal into the 129th place, trustworthiness and confidence of financial market is scored 2.9 (133rd place).

Financial Market Development in Portugal.
Chart 4. Financial Market Development in Portugal. Source: WEF.
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Banking Industry Country Risk

Banking Industry Country Risk Assessment (BICRA) is a methodology designed by Standard&Poor's "to evaluate and compare global banking systems". A BICRA is scored on a scale from 1 to 10, ranging from the lowest-risk banking systems (group 1) to the highest-risk (group 10). The BICRA methodology has two main analytical components: "economic risk" and "industry risk". Each of the components is then further divided into 3 "factors" that result in an economic and industry risk score for each country.

Portugal is included into group '7' with economic risk scored '7' and industry risk scored '6'.

BICRA Group 7
Economic risk 7
    Economic resilience high
     Economic imbalances high
    Credit risk in economy very high
Industry risk 6
    Institutional framework intermediate
    Competitive dynamics intermediate
    Systemwide funding very high
Government support assessment supportive

Table 1. BICRA for Portugal. Source: S&P's.

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Deposit Guarantee Scheme

Deposit Guarantee Schemes compensate certain deposits held by depositors of a bank that becomes unable to meet its obligations.

From a depositor's point of view it is important to know:

  • if the depositor is eligible within the terms of the deposit guarantee scheme;
  • if the depositor's bank is a participant in the deposit guarantee scheme;
  • if the depositor's type of deposit is covered by the deposit guarantee scheme.

All these details about deposit guarantee scheme in Portugal are summarised in Table 2.

Scheme Participantsall credit institutions operating in Portugal, branches of non-EU banks, branches of Portuguese banks abroad
Scheme Exemptionsbranches of EU-banks (covered by their home countries)
Covered Accountsany type of deposit, certificates of deposit
Covered Currenciesall
Maximum Protected Amount100 000 EUR
Paid In CurrencyEUR

Table 2. Deposit guarantee scheme in Portugal.

Further Information:
Deposit Guarantee Schemes in Europe

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Country Ceiling for Deposits

Moody's country ceilings for deposits specify the highest rating that can be assigned to local- or foreign- currency denominated deposit obligations of a bank or other deposit taking institution domiciled within that country.

Local currency (Euro) deposit ceiling for Portugal is set to A1 (upper medium grade), foreign currency deposit ceiling is A1 (upper medium grade).

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Deposit Rates

In Aug 2016, an agreed annualised deposit rate in local currency (Euro) of new contracts with agreed maturity up to 1 year between credit institutions and households was 0.36% which was below the Euro Area average (0.53%).

Deposit Rates in Portugal.
Chart 5. Deposit Rates in Portugal. Source: ECB.

Further Information:
Compare Bank Deposits in Portugal

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Banking Sector Structure

Currently there are 150 credit institutions operating in Portugal.

Recent structural changes (2013 - 2015) of the banking sector of Portugal are summarised in Table 3.

201320142015
Number of Opened Banks311
Number of Closed Banks144

Table 3. Recent structural changes in the banking sector of Portugal.

All the credit institutions operating in Portugal can be classified into several categories. Table 4 summarises the number of banks in each category.

CategoryNumber of Banks
Banks35
Branches of foreign banks21
Central banks1
Cooperative banks89
Savings banks4

Table 4. Number of banks by category in Portugal.

The list of the most recently opened banks in Portugal is provided in Table 5.

NameStart Date
 BANCO CTT, SA (new)October 2015
 BNI - Banco de Negócios Internacional (Europa), SA (new)August 2014
 Credit Suisse (Luxembourg), SA - Sucursal em Portugal (closed)November 2013
 Bank of China (Luxembourg), SA Lisboon Branch - Sucursal em Portugal (new)August 2013
 Volkswagen Bank GmbH - Sucursal em Portugal (new)March 2013

Table 5. The most recently opened banks in Portugal.

There are 21 branches of foreign banks from 9 different countries in Portugal. Table 6 shows the number of branches grouped by the country of origin.

Country of OriginNumber of Branches
 Spain5
 France4
 Germany3
 United Kingdom3
 Luxembourg2
 Switzerland1
 Netherlands1
 Austria1
 Ireland1

Table 6. Number of branches of foreign banks in Portugal grouped by country of origin.

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