The banking sector was part of the solution to help the Portuguese economy absorb the initial shock caused by the Covid-19 pandemic by avoiding a dangerous credit crisis, but it needs to guarantee resilience as it faces challenges like a likely rise in credit losses, problems. of profitability and the demands of digitization, Banco de Portugal (BdP) governor Mário Centeno said this Friday.
“We have a resilient financial system today, and that was definitely for the speed and intensity of the measures that were approved,” Centeno said, at a conference in Lisbon. “By having stronger capital and liquidity positions than in the previous financial crisis, the banking system contributed to providing for the initial shock of the pandemic, ensuring economic agents have the necessary credit available to them and reducing the pressure of de-leverage”
The BdP governor stressed that “banks were part of the solution and not part of the problem”.
“The banking sector has withstood the crisis quite well so far, despite a series of risks and weaknesses that have clearly grown. It helped absorb the shock and prevent a credit crisis that would have hurt the economy, I would say dramatically ”,
Mário Centeno warned, however, that it was necessary to guarantee the resilience of the banking system, “in the face of a likely increase in credit losses”.
He recalled that if banks, on the one hand, started providing credit risks immediately, and therefore took appropriate prudent action, on the other, the banking system continues to face profitability problems and is it must respond to the challenges posed by digitization.
“The solutions to these challenges must not only come from all European countries, but must have a shared focus. Financial institutions must play their part, responding to the challenge with determination and making decisions that do not forget the importance of their responsible contribution to supporting the economy ”, said the former Finance minister and former president of the Euro Group.
“But we must not lose sight of the major structural weaknesses of the European banking system, which were evident before this crisis”, he stressed. “It is necessary to continue to reduce excess capacity and improve cost effectiveness in order to face low profitability, seeking business models that respond to an increasingly digital economy”.