The Bank of Portugal (BdP) will continue to apply a sectoral systemic risk buffer of 4%, applicable to institutions using internal ratings-based methods, which can be released to ensure credit provisions.
This buffer covers exposures guaranteed by residential properties.
On November 15, 2023, the BdP decided to introduce this buffer, applicable to institutions utilizing internal ratings, on the amount of risk-weighted positions in private portfolios secured by properties intended for housing in Portugal. This measure has been in place since October 1, 2024, as noted in a statement released by the central bank today.
“The Bank of Portugal must review the design and calibration of the buffer during 2025. Thus, with no substantial changes in context, based on the assessment of the measure’s effectiveness, the Bank of Portugal decided to maintain the buffer unchanged,” the statement reads.
This decision was made “after notification to the European Central Bank, which raised no objections to the proposal, and consultation with the National Council of Financial Supervisors,” in addition to a prior hearing procedure for interested parties.
The purpose of this instrument, which is preventive in nature, is “to increase the resilience of the banking system against the potential future emergence of systemic risk in the residential real estate market in Portugal,” explains the BdP.
“In a scenario where the risk source materializes, this buffer can be released to contribute to the continued provision of credit to the economy,” the bank notes, adding that in such a scenario, it “will announce the period during which no increase in this buffer is expected.”
