ANNUAL REPORT ACTIVITIES AND FINANCIAL STATEMENTS 2020 BANCO DE PORTUGAL EUROSYSTEM Lisboa, 2021 • www.bportugal.pt Annual Report | Activities and Financial Statements 2020 • Banco de Portugal Av. Almirante Reis, 71 | 1150-012 Lisboa • www.bportugal.pt • Edition Communication and Museum Department | Accounting Department • Design Communication and Museum Department | Design Unit • Translation International Relations Department | Translation Unit • ISBN (online) 978-989-678-729-5 • ISSN (online) 2182-6080 Contents Message by the Governor | 4 Mission and values of Banco de Portugal | 7 Statutory bodies | 9 I Activity | 13 Executive summary | 15 1 Response to the COVID-19 pandemic | 25 1.1 Preserving monetary policy transmission and favourable financing conditions for the economy | 25 1.2 Protection of loans to households and firms | 28 1.3 Monitoring of financial institutions and relaxation of supervisory measures | 29 1.4 Functioning of payment systems and means of payment | 30 1.5 Monitoring the economic activity and the financial system | 31 1.6 Business continuity management | 33 1.7 Social responsibility | 34 2 Price stability in the euro area | 35 2.1 Monetary policy | 35 2.2 Asset management | 38 2.3 Payment systems and means of payment | 40 3 Safeguarding of financial stability | 44 3.1 Regulatory framework | 44 3.2 Stability of the Portuguese financial system | 45 3.3 Resolution | 53 3.4 Upholding the legality of the resolution and enforcement measures | 54 4 Knowledge creation and sharing | 55 4.1 Research | 55 4.2 Statistics | 56 5 Strengthening internal governance and organisation | 58 5.1 Internal governance | 58 5.2 Internal control and risk management | 59 5.3 Human resources | 60 5.4 Systems, technology, information management and security | 62 5.5 Accountability, communication and services to the public | 63 5.6 International cooperation | 67 5.7 Sustainability | 68 II Report and Financial Statements | 71 1 Management Report | 73 1.1 Balance sheet | 75 1.2 Profit and loss account | 87 2 Financial Statements and Notes | 94 3 External Auditors’ Report | 159 4 Report and Opinion of the Board of Auditors | 162 Message by the Governor It was with honour, enthusiasm and a commitment to public service that I took up my duties as Governor of the Banco de Portugal in July 2020. It was a determined return to a ‘home’ that I have known since 1993, in the belief that the Banco de Portugal should contribute responsibly and decisively to defining coherent national policies, taking advantage of its technical capabilities, its public intervention and its recognised reputational capital. And this spirit of service to the Republic is all 2021 will be decisive at international, national the greater at times of the greatest challenges, and internal level. of which the year 2020 was an unfortunate Europe should follow up on the important milestone. integration decisions taken in 2020. The role of The pandemic, caused by the COVID-19 virus, monetary policy will not be the same again, from put society’s and its institutions’ resilience to the coordination with budgetary policies to concern test. Measures hitherto unused nor seen on such with economic and environmental sustainability. a scale were adopted to contain a sanitary crisis Portugal must be prepared to resume economic that unleashed an unexpected and accentuated activity with the same vigour it went through decline in economic activity. The risks to the immediately prior to the pandemic. Maintaining financial systems were evident from very early the same demanding goals of social, economic on. The tensions in the financial markets had repercussions in the Banco de Portugal’s missions and financial convergence with the European of maintaining price stability and safeguarding the Union whilst leading Europe in terms of growth financial system’s stability. and in financial conditions. The Banco de Portugal’s mission was carried The Banco de Portugal will be a part of this out and its significance as central bank to the process, in the certainty that an innovative Republic was felt by the whole staff. There was no organisation that rejuvenates every year must other way. It is in the most difficult moments that be ready for these challenges. The Banco de our work, our reflections and our organisational Portugal’s mission is to transmit to the financial skills take on the greatest importance and dictate system in general and the banking system in the results that the Bank can achieve and thus particular the same objectives that Portugal contribute to Portugal’s development. needs to guarantee its place in the future. 2021 It was natural, as well as fundamental that the will be a turning point for the Banco de Portugal, Banco de Portugal should have taken part in with the definition and launch of its Strategic Plan preparing the national and international measures 2021-25, where issues of openness to society, aimed at mitigating the economic effects of the active participation in the recovery and resilience pandemic, namely through guaranteeing liquidity roadmap for Portugal and the recognition of and the flow of credit to households and firms, all internal resources will be central to complying provided for by a suitable financial system. with its mission. Additionally, the Banco de Portugal presented I am certain that the conditions exist to reinforce analytical and forecasting information on the role of the Banco de Portugal, as one of developments of the Portuguese economy, fulfilling the institutional pillars of the Republic. It has its responsibility in knowledge production and unique obligations and must take advantage sharing. of its excellent staff and technical and policy Internally, I was able to witness the capacity of the capabilities to serve the country, contributing to Banco de Portugal and its staff in adapting to the the development of Portugal and Europe. unexpected needs and challenges of the past few months. Everyone’s recent dedication has been a huge success. In the secure implementation and use of the instruments for distance working, as well as in planning the return to in-person work, which has been adapted to developments in the pandemic and brought to fruition as soon as possible. Mário José Gomes de Freitas Centeno 6 Activities and Financial Statements 2020 Activities and Financial Statements • Annual Report • Banco de Portugal Banco Mission and values of Banco de Portugal Mission with its mission. Independence requires a clear mandate, the impossibility of seeking or taking Banco de Portugal is the central bank of the instructions from third parties, the protection of Portuguese Republic. It is part of the European the status of members of decision-making bodies System of Central Banks and the Eurosystem, and financial independence; the Single Supervisory Mechanism and the Single Resolution Mechanism. Transparency and accountability – In compliance Banco de Portugal’s mission is to: with its tasks in the context of the Eurosystem, Banco de Portugal is accountable to the Portuguese • maintain price stability; Parliament, the government and society for what it • promote financial stability. does, and why and how it does it; Team spirit – Banco de Portugal’s staff act in Values accordance with the principles of mutual assistance, knowledge sharing, loyalty and transparency; Banco de Portugal’s values are: Social and environmental responsibility – Banco Integrity – Banco de Portugal’s staff place society de Portugal acts in a socially and environmentally and public interest at the centre of their action responsible manner, operating as a social actor and uphold high ethical standards; and advocate of corporate ethics. Competence, effectiveness, efficiency – Banco de Portugal employs highly qualified staff in its The conduct of Banco de Portugal’s staff is in business areas. Its governance model, internal accordance with high ethical standards enshrined organisation and processes use best practices as in Regulamento da Comissão de Ética e dos Deveres a benchmark; Gerais de Conduta dos Trabalhadores do Banco de Independence – Banco de Portugal is independent Portugal (Regulation of the Ethics Committee and in functional, institutional, personal and financial the General Duties of Conduct of the Employees terms, which is a prerequisite for compliance of Banco de Portugal). 7 Statutory bodies Board of Directors* 1 Governor Mário José Gomes de Freitas Centeno 2 Vice-Governor Luís Augusto Máximo dos Santos 3 Director Hélder Manuel Sebastião Rosalino 4 Director Luís Manuel Sanches Laginha de Sousa 5 Director Ana Paula de Sousa Freitas Madureira Serra * As at 31 December 2020. Carlos da Silva Costa ceased functions as Governor on 19 July 2020. 4 2 1 3 5 Board of Auditors* Chair Nuno Gonçalves Gracias Fernandes Members Member – Statutory Auditor Óscar Manuel Machado de Figueiredo Member Margarida Paula Calado Neca Vieira de Abreu Advisory Board** Governor Mário José Gomes de Freitas Centeno Vice-Governor Luís Augusto Máximo dos Santos Former Governors Carlos da Silva Costa Vítor Manuel Ribeiro Constâncio António José Fernandes de Sousa Chair of the Board of the Auditors of the Banco de Portugal Nuno Gonçalves Gracias Fernandes Chair of the Portuguese Banking Association Fernando Faria de Oliveira Chair of the Portuguese Treasury and Debt Management Agency (IGCP, E.P.E.) Cristina Maria Nunes da Veiga Casalinho Representatives from the Autonomous Regions Pedro Miguel Amaro de Bettencourt Calado Ethics Committee*** Chair Vítor Manuel da Silva Rodrigues Pessoa