The risks to financial stability remained high

Since the last Financial Stability Report was published in November 2022, financial stability risks have remained high, and the cycle of interest rate hikes has not yet come to an end. There has been further turbulence in international financial markets triggered by bank failures in the US and Switzerland.

Portuguese banks have adequate capital and liquidity and access to funding

Portuguese banks have high levels of capital and liquidity and the ability to raise funding from the European Central Bank, if needed.

The most vulnerable households and firms may face difficulties as prices and interest rates rise

The most vulnerable households may find it difficult to repay their loans, due to high inflation and rising interest rates. In such a scenario, the share of vulnerable firms will also tend to increase.

Banks:

• Should adjust loan terms and conditions to their customers’ ability to pay;
• Must  pursue prudent provisioning and capital conservation policies allowing them to use part of the profits to increase their ability to absorb losses, taking into account existing risks, and to continue financing the economy.