Six Portuguese banks told to “cushion up” by 2017

The country’s embattled bank regulator, Bank of Portugal, has given the nation’s six largest banks an ultimatum. They all have to ‘up’ their reserves by January 2017, in order to “guarantee the stability of Portugal’s financial system”.

The banks involved are Caixa Geral de Depósitos, Novo Banco, BPI, Santander Totta and Montepio, reports negocios online, saying BdP has given them a year to “constitute their cushion”.

As to cushion sizes, these depend on risks attached to bank business, explains the financial site.

Thus, CGD has to find the most (1% of its current reserves), followed by BCP and Novo Banco (0.75%), BPI and Santander Totta (0.5%) and Montepio (0.25%).

Failure to increase reserves in time will not, per se, put any bank’s activity at risk, stressed Costa in the statement put out by the BdP yesterday, but it would lead to significant restrictions.

The new demands defined by BdP follow a grim period of bank collapses in Portugal and have been defined with these only too firmly in mind.

A recent BdP statement alluded to concerns over national banks’ “capacity to absorb unexpected losses” and how this has to be increased.