During a hearing in Parliament on Wednesday, ahead of his appointment as Governor of the Bank of Portugal (BdP), Álvaro Santos Pereira discussed various issues ranging from interest rates to his views on employees at the regulator, banking profits, and “fiscal discipline.”
What exactly did Álvaro Santos Pereira say at the Assembleia da República? Here, we highlight the five key points.
1 – “Fiscal discipline is essential in the coming years”
Álvaro Santos Pereira highlighted a set of risks to both the global and national economy and emphasized that “fiscal discipline is essential in the coming years” to maintain “room for maneuver.”
He listed various economic risks, including budgetary risks, financial crises in less developed and emerging countries, and issues related to crypto-assets.
2 – Santos Pereira rules out staying as a consultant at BdP after his term as governor
The incoming governor of the Bank of Portugal mentioned that if Mário Centeno wishes, he will remain a consultant for the central bank, but Santos Pereira has no intention of staying on as a consultant after his term.
“As an employee, one has the right to remain as a consultant. As governor, I would never stay on the bank’s staff after my term,” he told deputies at the Budget and Finance Committee, during the mandatory hearing before his appointment.
Currently, Santos Pereira said, Mário Centeno (still governor) has not informed him of his future plans. Last week, Lusa asked the BdP if Mário Centeno will stay as a consultant after his governorship, but there was no response.
3 – Interest rates? They will remain “stable for some time”
Álvaro Santos Pereira stated that he does not take a “dove” stance at the ECB, advocating for a more restrictive monetary policy, and believes that interest rates in Europe “will remain stable for some time.”
When questioned about his stance among eurozone governors, Santos Pereira asserted that he is not a “dove,” which implies a preference for a less restrictive monetary policy. “In monetary policy, as in fiscal policy, it is important to have discipline to maintain room for maneuver and buffers to act,” he argued.
Regarding the interest rate cycle, the future governor noted that “there is currently divergence in rates” across various regions, such as Japan, which he expects to increase rates prudently.
4 – Bank profits are necessary for the “economy to function well”
Álvaro Santos Pereira argued in favor of a healthy banking sector with profits to ensure that the economy “functions well,” highlighting the importance of promoting banking consolidation at the European level.
Santos Pereira was asked by the PCP about high banking profits and defended bank profitability as essential for sector stability. “Do you prefer a profitable banking sector or one reliant on taxpayer money?” he asked.
He pointed out that when banks are very fragile, they are vulnerable to foreign investments, and in states of absolute fragility, obtaining capital for protection is challenging. Santos Pereira also emphasized the importance of European banking consolidation for strengthening the banking and financial sector.
5 – BdP will cooperate on headquarters but cannot be audited by Finance Ministry
Santos Pereira stated that the BdP will cooperate with the Inspectorate-General of Finance and provide information about the new headquarters, but it cannot be audited by politically controlled entities.
“Those with nothing to hide fear nothing, and the BdP will provide all necessary information to the Portuguese people and respond to all questions from the IGF,” said Santos Pereira during the parliamentary hearing before his appointment as BdP governor.
However, he clarified that the BdP is not subject to “audits conducted by politically controlled institutions,” such as the IGF, and can only be audited internally or by the Court of Auditors.
Regarding the new headquarters, Santos Pereira said he would familiarize himself with the process upon assuming office, as he will have to make decisions. He also noted the importance of consolidating BdP’s various departments dispersed across Lisbon into a single building.
