Banks not worried over 4% capital cushion

The bosses of Portugal’s ‘big five’ banks CGD, BCP, Novobanco, Santander Totta and BPI said they weren’t worried about the Bank of Portugal’s insistence that their financial institutions set aside a new 4% capital reserve to offset losses from properties given as loan collateral.

Under new rules handed down from BoP governor Mário Centeno, banks have been told they should have a capital buffer of 4% for their mortgage portfolios by October 1, 2024.
Reports Jornal Económico, the banks affected by the measure — and not all are (Caixa Geral de Depósitos is not included) — will have to set aside an estimated €400 million with each bank having to set aside between €50 and €100 million, according to the bankers.
Novobanco is expected to set aside the lower limit of €50 million according to one of its directors Luís Ribeiro who said that it already had a high capital ratio and therefore did not expect a significant impact.
However, he was the only bank boss who slammed the measure by saying: “This buffer shouldn’t be applied because it doesn’t reflect the true picture in Portugal”.
“We’ve already had a load of macro-prudential measures in the past like the DSTI limit (Limits to the debt service-to-income ratio (DSTI); i.e., the ratio between monthly instalments of total credit agreements and the borrower’s income, net of taxes) and limits on the lengthening of housing maturities) and limits on Loan-To-Value.
Miguel Maya, CEO of BCP, didn’t think the measure excessive, and that the banks had already been fairly prudent. “It’s news for the market, but for those in banking we’ve already set aside reserves for such risks to capital ratios. We’re already working clearly above regulated capital ratios”, he said.
The measure comes after the Governor of the Bank of Portugal, Mário Centeno, told the American Club of Lisbon earlier this month (November 9) that the banks had traditionally had a poor record in Portugal for setting money aside for a rainy day when crises hit. It seems now they don’t.