Overvalued properties are still not a risk for the bank

05 Jul 2021 min de leitura

Laginha de Sousa, director of Banco de Portugal (BdP) responsible for financial stability, believes that the banking system is relatively protected”.

Although real estate in Portugal is overvalued, for the time being, it still doesn`t pose a risk to the bank, according to the statements by Laginha de Sousa, director of Portugal Bank witch is responsible for financial stability, to Business Newspaper.

The possible impact that the drop in prices in this sector could have on the bank´s credit portfolio worries the regulator, however, and according to him, there are several factors that “protect” the system. The fact that mortgage credit is not “concentrated and on families whose jobs are in the sectors most affected by the pandemic” is one of them, he said in an interview with the newspaper.

“There is an increase in real estate prices, perhaps beyond what could be explained by some simpler economic rationale, but there is no evidence that this is leading to the accumulation of risk within the banking sector”, he adds.

In Laginha de Sousa´s opinion, “this price increase results from a set of structural changes, namely the fact that we have more and more foreign players in national real estate, whether it’s particular or funding”.

Even so, and despite this being a source of “some” risk, “because many of these investors have debt with the international financial system and, if there is a change in the financing conditions, this can lead to a rapid fall in the price of real estate ”, Laginha de Sousa considers that, even if that happens, “the banking system is relatively protected”.

“Real estate is always a very relevant sector for any financial system, but, at the moment, it does not appear as a factor of concern for systemic risk”, he stresses.

Source: Idealista