PORTUGAL: An Introduction to Banking & Finance: Regulatory
Financial Regulation Developments in Portugal
Portugal has implemented the main EU directives applicable to the financial sector, and whenever discretion is conferred on member states, it normally chooses to apply the full scope of such directives without exercising opt-out rights. Its supervisory authorities also follow closely ESMA, EBA and EIOPA’s guidelines, and usually only issue guidance of their own on matters that the EU authorities have not addressed.
The supervisory model is tripartite: the Bank of Portugal (BdP) oversees banking and payment institutions; the Portuguese Securities Market Commission (CMVM) supervises investment services, securities markets and asset managers; and the Insurance and Pension Funds Supervisory Authority (ASF) covers insurance and pensions. The three supervisory authorities adopt a common-sense and constructive approach, in particular the CMVM and the Bank of Portugal being active in bringing regulatory actions and sanctioning proceedings.
Portuguese legislation on fields not harmonised at the EU level is generally adjusted to market trends, and its drafting benefits from the active contribution of supervisory authorities and the relevant associations of the financial services sector. In this respect, it is worth highlighting the enactment in 2023 of the Asset Management Act, which set forth a legal framework applicable to collective investment schemes, permitting the launch of all types of alternative investment funds, including private credit funds, funds with no specified policy, and funds investing in special assets such as commodities or crypto-assets.
Information and Communication Technology (TIC)
During 2025 and into 2026, there will be a strong focus on adapting to the new requirements applicable to TIC in the financial services. Most financial institutions are struggling to comply with the demanding requirements of the EU Digital Operational Resilience Act (DORA), which entered into application in January 2025, and in the coming months will also have to adjust to the implementation of the NIS2 Directive in Portugal.
The EU Artificial Intelligence Act will enter into full force in August 2026, with practical implications for the financial sector, which is increasingly adopting LLMs and other AI-based systems. Areas of concern include credit scoring, client profiling and certain compliance monitoring tools, which will be subject to strict obligations on governance, transparency and risk management.
Fund managers and Portuguese credit institutions are increasingly seeking legal assistance in relation to frauds committed by hackers via infiltration of their clients’ systems and, in some cases, the institutions’ own systems. Aside from the criminal and civil law implications, these cases also have to be addressed from a regulatory and compliance standpoint in view of the new legislation applicable to TIC.
ESG Regulation
In the ESG sphere, almost all financial institutions have opted out of reporting principal adverse impacts (PAI) under the EU Sustainable Finance Disclosure Regulation (SFDR), perceiving such reporting as disproportionate. PAI reporting is essentially carried out by large banks and insurers, who are not entitled to opt out.
Fund managers have instead gravitated towards Article 8 SFDR products (and in a few cases, Article 9), benefitting from the lighter disclosure framework applicable to these types of products under the SFDR and its Delegated Regulation.
The CMVM has been rather active in its supervisory inspections, with entities being recently questioned on the effective implementation of SFDR requirements. On the other hand, the Portuguese market is awaiting with interest forthcoming EU initiatives to simplify the SFDR regime.
Investment Services and Fintech
The most significant development in investment services is the entry into force of the Markets in Crypto-Assets Regulation (MiCA). However, Portugal has not yet adopted implementing legislation. This has resulted in an impasse, which is having a negative impact on a market in which there is a strong presence of crypto and blockchain business: no new virtual asset service providers (VASPs) can be authorised, and EU-licensed VASPs cannot passport their services into Portugal.
Collective Investment Schemes
Since a comprehensive reform in 2023, the regulatory framework has enabled originality in the creation and structuring of alternative investment funds and their policies, with the CMVM adopting a constructive approach in its supervisory practice. In addition, a 2024 amendment to the tax regime applicable to alternative funds clarified and broadened the available benefits for alternative investment funds.
Still, the market remains heavily focused on the launch of real estate funds, driven by the dynamism of the Portuguese property market. Venture capital funds remain the second most commonly used structure, partly owing to their eligibility for golden visa residency applications. The launch of other types of alternative funds has been limited. The CMVM has sought to stimulate the establishment of ELTIFs in light of the greater flexibility introduced by ELTIF 2.0, but so far with little success. It is, however, worth noting the recent launch of a crypto-asset fund and a private credit fund.
With the AIFMD 2 implementation formally due by 2026, managers are already considering the novelties of this regime, which will introduce new rules on loan-originating AIFs, liquidity management tools (LMTs), delegation oversight, reporting, and depositary obligations.
Banking Sector
The most impactful development in the banking sector has been the delayed transposition of the EU Directive on credit servicers and credit purchasers. Portugal opted for a maximalist approach, extending the scope of the regime beyond non-performing loans (NPLs) to also encompass performing loans.
Moreover, while the Directive only required the appointment of a licensed credit servicer in cases involving consumer credit exposures (or, for non-EU purchasers, exposures to individuals and SMEs), the Portuguese framework imposes a general obligation on non-regulated transferees to appoint a licensed credit servicer in all circumstances.
In addition, the Portuguese legislature restricted the transfer of performing loans exclusively to credit institutions, regulated alternative investment funds (AIFs) and securitisation vehicles.
These nuances of the Portuguese regime have created higher compliance burdens and transaction costs beyond the EU baseline.
Final Remarks
The Portuguese financial sector continues to face a significant regulatory burden, with divergent impacts across different market participants. While large banks and insurers have expanded their in-house legal and compliance functions, mostly internalising recent regulatory projects such as DORA and SFDR, smaller-sized institutions such as investment firms, asset managers and credit-granting institutions typically lack the resources to build comparable teams, leading to increased reliance on external legal counsel and consultants.
The Portuguese financial sector is also experiencing a dual movement: on the one hand, continuous tightening in key areas such as operational resilience, ESG and governance; on the other, an emerging EU-level agenda to simplify and rationalise the rulebook (eg, SFDR review and securitisation reform).