'Banks are making provisions to prevent losses in the real estate market'

Banks in Portugal will have to create capital investments for loans for property intended for housing, providing support against a possible crisis in the real estate sector. This is a systemic risk that the banking regulator, the Bank of Portugal, emphasizes is preventive and is equal to 4% of the portfolio of loans for property intended for housing held in Portugal. Banks will have to establish this financial cushion by October 1, 2024 and it will have to be reviewed every two years. Under the measure, it will apply to BCP, BPI, Santander and Novo Banco (which use the IRB methodology to assess customers' ability to repay loans to the bank).

In its''In a statement, the Bank of Portugal notes that the banks covered by the measure have sufficient reserves to manage and implement sectoral systemic risk, and anticipates that a cushion can be created "without prejudice to the implementation of other prudential requirements and guidelines or the credit granting activities of these institutions".

Bank of Portugal emphasizes that the application of this instrument "has a preventive character" and aims to "increase the institutions' resilience to the potential materialization of systemic risk in the residential real estate market in Portugal." "Should the risk materialize, this reserve may be released to support loans to the economy. In this context, the Bank of Portugal will announce''the period during which this reserve is not expected to increase,'" the information said.

The reserve is made up of Common Equity Tier 1 core equity and can be applied to all risk positions or sectorially, i.e. to a subset of risk positions.

The Bank of Portugal's decision follows notification from the European Central Bank "which had no objection to the proposal" and after consultation with the National Council of Financial Regulators, the European Systemic Risk Committee and the European Commission.

Last week, Bank of Portugal Governor Mario Centeno advised the banking sector to use profits from its current positive business cycle to strengthen financial''cushions and thus be better prepared for future crises.

The Bank of Portugal believes that banks hit by the measure have sufficient reserves to manage and implement sectoral systemic risk.

The four largest private banks operating in Portugal ended the first nine months of the year with a profit of 2.3 billion euros, to which can be added the 987 million euros presented by Sounder Geral de Positos this Friday.

The yen rises, the snail increases deposits. Profits of the five largest banks exceed 5 billion in nine months.