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Portugal has one of the highest levels of default in Europe and the Portuguese banking supervisor is watching. Mário Centeno, governor of the Bank of Portugal, admitted yesterday that the measure will be re-evaluated in the coming months. According to the former Minister of Finance, “the moratoriums reach a significant dimension, much greater than the average for the eurozone and the average for the European Union.” In his first hearing as governor in the Committee on Budget and Finance, Centeno stressed that the moratoriums are “an instrument that must remain active but must evolve.”
In total, companies and families have suspended 13,000 million euros of credit installments until September 2021, according to data from the Bank of Portugal’s Financial Stability Report published recently. The Bank of Portugal estimates that, in the case of companies, until the end of the moratorium term, the overdue and unpaid installments may amount to around 11,000 million euros.
According to the same report, non-performing loans amounted to € 46 billion in September 2020, up from € 43.2 billion in June 2020.
The governor of the Bank of Portugal defended that, “on the side of the banking sector, the preservation of capital in banking institutions is crucial.”
Centeno’s words come at a time when concerns about a possible spike in bad loans in the banking system are mounting, when the default deadline emerges in late September 2021.
For Centeno, “the country must remain focused on responding to the crisis,” and reaffirmed the need to maintain policies to support the economy. According to the governor, the current crisis “requires the maintenance and adaptation of economic policies until the end.”
Centeno reiterated that “this crisis is not a structural crisis” and also “it is not a crisis of over-indebtedness.”
Portugal is going through one of the biggest economic crises in history, with the International Monetary Fund forecasting a 10% drop in Gross Domestic Product (GDP) in 2020. At the origin of this crisis are the measures adopted by the government, in line with those implemented by others. countries to manage the new coronavirus epidemic. Unemployment skyrocketed and companies closed due to measures, which included confinement or curfews of the population, prohibition of movement between municipalities, and forced closure of commercial and restaurant establishments at certain times.
New deadline to join
The government announced yesterday that it will authorize new adherence to bank moratoriums until March 31, 2021. The new term was approved yesterday in the Council of Ministers. “This amendment aims to protect against liquidity and treasury limitations derived from the economic impact of the second wave of the pandemic,” according to the statement issued after the executive meeting.
The families and companies that adhere to the moratorium benefit from its effects for a period of up to nine months, applying the other rules provided in the current regime.
As for the “companies that make up the sectors most affected by the pandemic, they continue to benefit from an extension of the maturity of their credits, for a period of 12 months, in addition to the period in which the credits were deferred, which allows making payments “. more staggered and in line with the evolution of economic activity ”.
Centeno insisted on the need for banks to preserve their capital at a time of deep crisis, such as the one currently going through. In the case of Novo Banco, the governor opposed the awarding of awards to the bank’s managers in 2020. Centeno recalled that he had already spoken out against this measure when he was Minister of Finance.
He said that banks have to preserve capital and that the payment of premiums to administrators “has a negative impact on the capital of banks.” He remarked that he does not see the measure as an “adequate” practice in 2020. These are management bonuses of the order of two million euros to be paid deferred in 2022.
This year, Novo Banco received a new injection of capital from the Resolution Fund, which exceeded one billion euros. These capital injections are part of the agreement made when the bank was sold to Lone Star to cover losses on the sale of assets from the time of Banco Espírito Santo.
According to the agreement signed with Lone Star, Novo Banco is expected to request a new capital injection in 2021, which may amount to around 900 million euros. But Parliament canceled the state transfer to the Resolution Fund that was foreseen in the State Budget proposal for 2021, for an amount of 476 million euros. The sum would be complemented by a loan granted to the Fund by a consortium of national banks.
Elisabete Tavares is a journalist for Dinheiro Vivo
