The International Monetary Fund (IMF) suggested on Tuesday the creation of a capital reserve aimed at reinforcing the resilience of Portuguese banks against the “macrofinancial risks of exposure to the real estate sector.”
“To reinforce the resilience of the banking sector against macro-financial risks from exposure to the real estate sector, the Portuguese authorities could consider the gradual introduction of a capital reserve for sectoral systemic risks, provided that procyclical effects are avoided,” reads the statement. the report of the IMF mission to Portugal under Article IV, published this Tuesday.
Despite the “continuous improvement in the balance sheets of national banks”, their liquidity reserves “remain high” and delinquency rates have decreased, the institution warns that “this trend can be reversed in adverse scenarios”, so it is ” It is crucial to maintain prudent risk management practices and closely monitor banks’ vulnerabilities.”
“The capital ratios of banks (CET1) are comfortably above the minimum required, although below the euro area average and slightly below 2022, due to dividend distributions and some losses in valuations,” he points out. .
However, he warns, “the increase in the cost of living is penalizing family budgets and may harm the ability to pay debt, which requires continuous monitoring, since the deterioration of the quality of the assets may materialize.” with some delay.”
In this context, the IMF mission understands that “a gradual tightening of macroprudential policy would help to contain the systemic risks derived from the vulnerabilities of the real estate market”, considering that this “is overvalued, after years of strong rises in the prices of the House”. , and that “persistent imbalances in this market would further increase systemic risks.”
For the International Monetary Fund, maintaining prudent risk management practices and close monitoring of banking vulnerabilities are therefore “crucial in view of the current economic and financial uncertainties.”
“Banks and supervisors must continue to maintain vigilance over credit quality, interest rate risk and liquidity management. Prudential policies must ensure that banks continue to strengthen their capital levels and anticipate contingencies”, it maintains, and advises “prudence in the distribution of capital”. .
Still in the real estate field, the IMF reports that policies to support the supply of housing “would help alleviate the current pressures on access to housing”, considering that the early termination of the Golden Visa program “should not have an impact significant in house prices”.
“Measures to increase the supply of housing and rentals -complemented with public investment in social housing within the scope of the Recovery and Resilience Plan- are essential to reduce the imbalance in the real estate market and improve the accessibility of prices,” he says.
The IMF also recommends the continuation of the strengthening of the private debt resolution regime: “The further simplification of judicial processes and the focus on extrajudicial procedures should continue. The duty to declare bankruptcy, which was suspended during the Covid- 19, must be restored so that resources are better allocated to more productive use,” he says.
Source: TSF
