Lisbon, Oct. 7, 2024 (Lusa) - Banks in Portugal will have to reinforce their capital "cushions" for credit losses, according to the public consultation launched on Monday by the Bank of Portugal (BdP) which changes the countercyclical capital reserve to 0.75%.
Until now, the methodology for calculating the countercyclical capital buffer (calculated on the basis of each bank's credit to the private sector weighted by risk) has meant that it has regularly been set at %.
Today, in a statement, the BdP announced that it will change the methodology and that the countercyclical capital reserve will rise from the current 0% to 0.75% on 1 January 2026. In other words, that's when banks will have to reinforce this capital "cushion".
The banking regulator and supervisor explained that it decided to change this amount while there is a positive phase in the economic cycle so that, in the future, at a time of growth in problem loans, they will have more capacity to absorb losses and mitigate the fall in loans.
The BdP also said this revision was "in line with the trend followed by various macro-prudential authorities in Europe and with the guidelines of various international authorities".
The countercyclical reserve is in addition to the core Tier 1 capital reserve (the CET1 capital ratio).
The Bank of Portugal is also taking this measure at a time of high levels of capitalisation and profitability for banks, which allows them to strengthen their capital accumulation in good time.
According to information available to Lusa, today's change means that smaller banks would have to put aside €50 million and larger banks around €200 million.
Contributions to the public consultation on this draft notice can be sent to the BdP until 19 November.
The Bank of Portugal will announce the percentage of the countercyclical reserve at the end of this year, and the banks must set aside the money by 1 January 2026.
Bank regulators and supervisors have been warning banks to use part of their current profits to increase their capital cushions and thus be better prepared for future crises.
The five largest banks operating in Portugal - Caixa Geral de Depósitos (CGD), Santander, Millennium BCP, Novo Banco and BPI - recorded aggregate profits of €2.619 billion in the first six months, a rise of 31.4% compared to the same period last year.
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