Portuguese banks are closing to Brazilian banks

LISSACOBON - The rapid growth of the Brazilian community in Portugal, which has quadrupled to 400,000 people in 10 years, is causing Brazilian financial institutions to increasingly focus on the Portuguese market. Not without reason. Brazilians are the second group with a high demand for home equity loans among foreigners living in Portugal. They are also boosting the insurance sector, which was previously in decline but has been given a new impetus with the growing demand for real estate, car, life and health policies. The impact has been so strong that insurance companies have had to hire Brazilian staff to deal with this new audience, which is more''demanding.

But the interest of Brazilian banks in the Portuguese market has encountered almost insurmountable obstacles set by the Bank of Portugal, which is responsible for regulating and controlling the local financial system. All recent studies conducted by representatives of Brazilian institutions have ended in disappointment due to excessive requirements. One of the most illustrative cases of this complex process involves Banco Master. Two years ago, they acquired control of Banco BNI Europa, an Angolan-owned bank, introducing 8 million euros (44 million BRL) of capital, which restored the bank's financial strength. However, Banco de Portugal demanded that Banco Master fire all of BNI's Brazilian directors, names''which were not approved by the regulator, as well as to finalize the change of control over the bank. The deal had to be abandoned. "This decision by the Bank of Portugal came two years after the authorization of the capital increase of BNI. It is very strange that only Brazilian executives were rejected as administrators. No Portuguese ones were rejected," says a source familiar with the situation. "We consider this decision by the Portuguese regulator for reserving the market. But we also do not rule out xenophobia," he adds.

One thing is clear: Banco Master is trying to recover the money invested in BNI Europe to open branches in Luxembourg, where branches of Bradesco and BTG Pactual banks already operate. "Portugal and Luxembourg are part of the''European Union. Why is it easier for one country to accept Brazilian banks and another not?" the source wonders. "There's something wrong with that," he adds.

According to the Bank of Portugal, there are currently three Brazilian banks authorized to operate on Portuguese territory: the Itaú BBA, Bradesco and Banco do Brasil, which have their main base elsewhere in Europe. These institutions operate in a very narrow segment such as large wealth management and foreign trade operations. They are offices rather than traditional banks targeting a broad audience. One reason for this limitation, in addition to the high requirements of the Portuguese regulator, is that until recently they did not have the scale to serve the physical''individuals and Brazilian companies. Now the situation has changed.

In addition to the 400,000 registered Brazilians living, working and studying in Portugal, there are at least 200,000 more with dual citizenship and more than 150,000 waiting for documentation. By 2028, immigration experts such as attorney Fabio Pimentel of the firm Pimentel Aniceto predict that there could be one million Brazilians in Portugal, representing 10% of the country's population. Given this population growth, Banco do Brasil decided to strengthen its presence in Portugal, where it previously had street branches in Lisbon. In this regard, the bank's management has appointed Karen Machado to manage the area of private banking, which targets high-income individuals. It is not yet''a huge step, but an important achievement, according to Brazil's ambassador to Portugal, Raimundo Carreiro.

Isaac Sidney, president of the Brazilian Association of Banks (Febraban), says he is not aware of specific cases of banks that have applied to operate in Portugal. "I am very sorry that the requirements put a barrier in front of our activities. I have absolute confidence in the reliability of Brazilian banks, they can be a supporting arm for the Portuguese economy and banking sector,'''emphasizes he. In his view, the banking system anywhere in the world should not be allowed to fail. That is why central banks are increasingly tightening regulation. 'We first and foremost need to guarantee the reliability of the banking industry. This requires strict and transparent rules and active and preventive controls to keep banks sound. In Brazil, we have all this," he adds, who recently had lunch with Portuguese bankers in Lisbon. According to Sidney, the Brazilian banking system is in no way inferior to other countries in terms of rules, regulation and combating illegal practices. 'On the contrary, we have a banking industry that is a model for the world, especially because of the strength and quality of regulation and supervision''have stepped up significantly to avoid a repeat of what we have seen in the recent past,' he adds. This year, amid tightening regulations, banks operating in Portugal are posting the highest profits in history with well above average profitability in Europe. Aside from fears of more bankruptcies - in the last 20 years it could be said that all Portuguese banks have gone bust - the Bank of Portugal has also tightened the fight against money laundering, especially among terrorists. This was a directive from the European Central Bank (ECB), which sees a huge risk that the region's financial system could become a base for organized crime.

At the time of the war between Russia and Ukraine, large fortunes were discovered that belonged''to Russian oligarchs and were kept in European banks. In a written statement, the Bank of Portugal says that there were no rejections of applications by Brazilian institutions to open branches in the country because, in fact, there were no processes to open their operations. Regarding Banco Master, the regulator says the institution eventually rejected the business. "Banco de Portugal's activities, within the scope of its powers, are based on strict compliance with applicable legal provisions. In this context, all natural and legal persons who intend to establish or acquire a financial institution in Portugal, as well as to manage their activities, must submit complete applications, providing the competent authorities with all the information required by the national and''European legislation, thereby demonstrating full compliance with the applicable legal criteria,' the statement reads. The Bank of Portugal also emphasizes that "projects are not subject to approval by the competent authorities only in cases where all current and objective legal criteria are not met." It adds: "As regards the creation and acquisition of qualified interests in credit institutions with headquarters in Portugal, the adjudication of these procedures is entrusted to the European Central Bank based on an objective assessment of the submitted project in terms of full compliance with the applicable legal requirements. "