Credit. Banks' new reserve for loss prevention.

Banks will now be required to hold a capital reserve for loans to individuals secured by residential real estate.

Bank of Portugal said that banks subject to this measure have sufficient reserves for management purposes to implement a reserve for sectoral systemic risk and expects that the reserve can be established without violating other prudential requirements or the credit activities of these institutions.

The body, headed by Mário Centeno, notes that the application of this instrument is preventive and aims to increase the resilience of institutions to possible systemic risk in the residential real estate market in Portugal in the future.

"In the event of the realization of''The risk of this reserve may be released to support the provision of credit to the economy.

This reserve consists of Common Equity Tier 1 and can be applied to all risk positions or on a sectoral basis, i.e. to a subset of risk positions.

The Bank of Portugal's decision was taken after notification to the European Central Bank, which did not object to the proposal, and after consultation with the National Council of Financial Regulators, the European Systemic Risk Committee and the European Commission.