No public debt ‘red alert’ says Banking Association

The Portuguese Banking Association has stated that there is no “red alert” over bank exposure to Portuguese public debt.

“The association is aware of the increase in exposure of banks to Portuguese public debt in recent years, but believes that there is no red alert. The situation is acceptable” says Norberto Rosa, the General-Secretary of the APB.
Rosa added that the banking system should continue to invest in buying Portuguese government bonds given the current situation in the market.
“It is important to monitor and accompany this situation, but there is not red alert situation” he said on Tuesday in the Portuguese Parliament in a hearing requested by the parliamentary group of the centre-right PSD opposition party.
The statement was issued one month after the IMF/EU troika which oversaw Portugal’s economy for five years in the wake of a €78Bn bailout in 2011 issued a warning about the high amount of Portuguese sovereign debt on the balances of Portugal’s banks in 2018.
The European Central Bank warned that Portugal continued to be vulnerable and an increase in interest rates would represent a shock to the banking system.
Last year, the state-run bank Caixa Geral de Depósitos (CGD), BCP, Santander Totta, Novo Banco and BPI saw their portfolios containing Portuguese government bonds swell by 30% to more than €21Bn which is worrying international authorities.
The actual weight of Portuguese public debt on the banking system’s balance sheets in Portugal has gone from 1% in 2008 (as the international sub-prime and financial crisis began to unfold) to 9% in 2018.
The IMF issued the warning: “In a grave scenario, aggressive increases in the yields of government sovereign bonds would generate significant losses for European Banking Authority Banks, particularly in Italy, Portugal and Spain”.