Article 3, Paragraph 9. · Council Implementing Decision 2011/344/EU

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9.With a view to restoring confidence in the financial sector, Portugal shall aim to maintain an adequate level of capital in its banking sector and ensure an orderly deleveraging process in compliance with the deadlines set in the Memorandum of Understanding. In that regard, Portugal shall implement the strategy for the Portuguese banking sector agreed with the Commission, the ECB and the IMF so that financial stability is preserved. In particular, Portugal shall:

(a)ensure that banks' capital buffers remain adequate and follow the new capital requirements rules as laid down in Directive 2013/36/EU of the European Parliament and of the Council^note;

(b)advise their banks to strengthen their collateral buffers on a sustainable basis;

(c)remain committed to providing further support to the banking system, if needed, encouraging banks to seek private solutions while resources from the Bank Solvency Support Facility are available in line with the Union's State aid rules to further support viable banks, subject to strict conditionality;

(d)ensure a balanced and orderly deleveraging of the banking sector, which is critical in permanently eliminating funding imbalances and reducing the reliance on Eurosystem funding in the medium term. Banks funding and capital plans shall be reviewed quarterly;

(e)continue to strengthen the supervisory organisation of the Banco de Portugal, optimise its supervisory processes and develop and implement new supervisory methodologies and tools. The Banco de Portugal shall revise the standards on non-performing loans in order to achieve convergence with the criteria included in the relevant European Banking Authority technical standard in line with the timeframe set at Union level;

(f)continue to monitor on a quarterly basis the banks' potential capital needs with a forward looking approach under stress conditions including through the integration of the new top-down stress testing framework into the quality assurance process, which allows for a review of the key drivers of the results;

(g)continue to closely monitor the implementation of the measures agreed in the restructuring plans of banks having received public capital support;

(h)ensure timely disposal of the subsidiaries and the assets in all three State-owned special purpose vehicles, including through the two selected service providers;

(i)analyse banks' recovery plans and issue guidelines to the system on recovery plans in line with the relevant European Banking Authority technical standards and the relevant Union legislation on the recovery and resolution of credit institutions, and prepare resolution plans on the basis of the reports submitted by the banks;

(j)prepare quarterly reports on the implementation of the new restructuring tools; continue to monitor the implementation of the framework for financial institutions to engage in out-of-court debt restructuring for households and smoothen the application of the framework for restructuring of corporate debt. Prepare, in consultation with the Banco de Portugal, a strategic plan aiming at addressing the corporate debt overhang and supporting the capital reallocation towards the productive sectors of the economy, while promoting financial stability;

(k)continue the monitoring of the high indebtedness of the corporate and household sectors through quarterly reports and of the implementation of the new debt restructuring framework to ensure that it is working as effectively as possible;

(l)encourage, on the basis of the proposals already made, the diversification of financing alternatives to the corporate sector, develop and implement solutions that provide financing alternatives to traditional bank credit for the corporate sector through an array of measures aiming to improve their access to the capital markets;

(m)continue to evaluate the impact of the improvements in the government-guaranteed credit instruments on actual interest rates; stand ready to pursue policy alternatives, if deemed necessary, in order to ensure that government-guaranteed loans will be priced in a competitive and transparent manner in favour of end-users; regularly report on progress;

(n)establish a development financial institution (DFI) aiming at streamlining and centralising the implementation of the financial instruments supported by the European structural and investment funds for the 2014-20 programming period. The DFI shall not accept deposits or other repayable funds from the public, engage in direct lending, or invest in government debt or grant loans to the Government. The DFI's draft business model and by-laws shall be designed to avoid any additional burden on or risks to public finances.

Council Implementing Decision 2011/344/EU

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