Banking

   Historically, banking in Portugal was in the hands of eight very large family-owned private banks (Banco Totta e Açores, Banco Nacional Ultramarino, Banco Pinto e Sotto Mayor, Banco Espirito Santo, Banco Português do Atlantico, Banco Borges e Irmão, Banco Fonsecas e Burnay, and Banco Intercontinental Português), all regulated by the state-owned Banco de Portugal. After the Revolution of 25 April 1974, private banks and private insurance companies were nationalized; that is, taken over by the state. Nationalization created structural problems for banks because they were required to extend credit at negative real interest rates to finance the budget deficits of nonprofitable public enterprises. They were also plagued by undercapitalization, overstaffing, and excessive branching.

   The banking sector began to change during the 1980s, when, as a condition for joining the European Economic Community (EEC), it was liberalized and internationalized. In 1984, a law was passed that allowed private banks and insurance companies to be organized. In the 1980s, six foreign banks (Manufacturers Hanover Trust, Chase Manhattan, Barclays, Banque Nationale de Paris, Citicorp, and Gé-nérale de Banque of Belgium) and four majority Portuguese banks (Banco de Comércio e Indústria, Banco Internacional de Crédito, Banco Português de Investimento, and Banco Comercial Português) began operating. In the 1990s, the banks nationalized after the Revolution of 25 April were reprivatized (beginning with Banco Totta e Açores followed by Banco Português do Atlantico) by selling shares in them to the public. This has allowed some of the dispossessed families, such as the Espirito Santos, to attempt to regain control of their banks by becoming majority shareholders in them. Despite the privatizations of the 1990s, the Portuguese state maintains tight control over banking through the Banco de Portugal. The state continues to be a majority shareholder in the Caixa Geral de Depósitos, Portugal's largest savings bank, the Banco Nacional Ultramarino, Banco de Fomento e Exterior, and the Banco Borges e Irmão.