The Bank of Portugal (BdP) will retain the exemption to create a countercyclical reserve for banks in the first quarter of 2024, as it did in previous quarters.
“The countercyclical reserve ratio applicable from April 1, 2024 will remain at 0% of the total amount of risk exposure,” they explained.
According to the Central Bank of Portugal, the decision was taken at the deliberation of the Board of Directors on March 12, 2024, with the consultation of the National Council of Financial Supervisors.
The Bank of Portugal explains in a statement that “the countercyclical reserve ratio of private funds applies to all credit risk positions, the counterparty of which is the national non-financial private sector, credit institutions and investment companies subject to the supervision of the Bank of Portugal or the European Central Bank (Single Supervisory Mechanism). ), and is reviewed every three months.
“Countercyclical capital reserve” corresponds to an additional reserve consisting of common Tier 1 private funds (Class of common stock 1), which aims to protect the banking sector in periods of increased cyclical systemic risks due to excessive credit growth. When risks materialize or diminish, this additional reserve of private funds ensures that the banking sector has a greater ability to absorb losses and remain solvent, without interruption to the provision of credit to the real economy.
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