Portugal's central bank confirmed on Monday that its governor, Álvaro Santos Pereira, purchased shares in Galp and Jeronimo Martins shortly after taking office last year, but was forced to reverse these transactions following a review by the European Central Bank (ECB). This incident highlights the stringent compliance framework governing the personal investments of senior officials within the eurozone.

Details of the share purchases reveal that Pereira began building his positions just two months after his appointment. According to media reports, Pereira succeeded former Finance Minister Mário Centeno as Governor of the Banco de Portugal on October 6 last year, also becoming a member of the ECB's Governing Council. On December 17 and 29, merely two months later, he purchased shares in the two blue-chip companies in separate transactions on the open market, with no single transaction exceeding €50,000.

At the time of the purchases, Galp's stock price was under pressure due to an asset swap deal in Namibia, while Jeronimo Martins was facing challenges from inflationary pressures in the retail sector.

The ECB intervened, emphasizing that compliance is a non-negotiable requirement. Pereira reported these holdings in a mandatory declaration of interests submitted to the ECB in January. The ECB's Code of Conduct, effective since January 2023, explicitly prohibits senior officials from purchasing individual company stocks during their tenure, restricting them to investments in broadly diversified collective investment vehicles.

After the ECB's compliance department ruled that these transactions violated the rules, Pereira was compelled to liquidate the positions. The Portuguese central bank did not disclose whether the trades resulted in a profit or loss. However, if the share prices had declined during the holding period, it would imply that he incurred a financial loss.

Observers note that this appears to be the first time the ECB has publicly disclosed such an enforcement action against a central bank governor under its jurisdiction. The sanction was relatively mild—the governor retained his position but is expected to learn a lesson in political sensitivity. The Banco de Portugal's statement only indicated that "the divestment process was recently completed," with no mention of further penalties such as fines or suspension. This suggests that while the ECB intended to assert its authority on compliance matters, it opted for a measured response to avoid triggering a more severe governance crisis.