A “significant” exposure to Angola as well as the property sector are two of the main risks to the stability of Portuguese banks, warned Tuesday the Bank of Portugal (BoP) in its Financial Stability Report (REF).
The document indicates that, although in 2014 the Portuguese financial system had developed “within a framework of economic recovery and correction of macroeconomic imbalances,” there are still risks to financial stability, including the “significant concentration in certain asset categories.”
The Bank of Portugal has identified three asset categories: the real estate sector, banks’ exposure to sovereign debt – which increased from 2013 to 2014 – and the exposure of financial institutions “to oil-producing countries affected by the price drop” such as Angola.
The REF stated that there was “high exposure of credit institutions to the real estate sector” and that reductions in the value of assets “expose the balance sheet of financial institutions” and recommended that “the value of these exposures should be properly recorded” and that efforts be made to “gradually reduce exposures to the sector” taking advantage of market recovery.
For Angola and countries affected by the oil price fall, the REF said that “despite the positive impact on economic growth in Portugal,” there is still “an indirect exposure of the Portuguese resident financial sector companies with business relations or direct investment in Angola.”
Finally, the Bank of Portugal warned of the high exposure of Portuguese banks to sovereign debt, “in particular national debt, which can, among other things, increase costs associated with maintaining the balance sheet of banks.” (macauhub/AO/PT)