“The countercyclical capital buffer rate that will take effect from April 1, 2025, will remain at 0% of the total amount of risk positions, before increasing to 0.75% from January 1, 2026,” the banking regulator and supervisor indicated in a statement.
This decision was made by the Board of Directors of the Bank of Portugal, following consultation with the National Council of Financial Supervisors.
The countercyclical capital buffer is an additional reserve composed of Tier 1 capital (‘Common Equity Tier 1’) aimed at safeguarding the banking sector during periods of heightened cyclical systemic risk, which can be triggered by excessive credit growth, according to the central bank’s website information.
In October of last year, the banking regulator and supervisor explained that it decided to modify this amount during the positive phase of the economic cycle to ensure that in future periods marked by problematic credit growth, banks would have greater capacity to absorb losses and mitigate a downturn in lending.
The Bank of Portugal also stated that this revision aligns with trends followed by several macroprudential authorities in Europe and with the guidelines of various international authorities.
Banking regulators and supervisors have been urging banks to use part of their current profits to bolster capital buffers, thereby being better prepared for future crises.
