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Centeno says that the Reduction of Distressed Debts is a Major Challenge for Banks
7 February 2018
The Portuguese finance minister also believes that while the new European rules for banking are challenging to implement, in the end, “everyone will benefit.”
Portugal’s finance minister said Wednesday that the reduction of the high levels of bad debts remaining on banks’ balance sheets is the primary challenge facing the Portuguese financial system.
“The financial system has stabilised, but the challenge of bad debts still exists,” Mário Centeno said at the conclusion of the Banking Summit conference in Lisbon.
According to the official, “bad debts have fallen at an elevated pace since June 2016,” down more than two billion euros per quarter. However, he added that “there is still work to be done to converge” Portugal’s NPLs with European average levels of loans in default.
On the same subject, Centeno advised banks that they should undertake “prudent risk assessments” when lending and called on supervisors to ensure that institutions do not pursue policies that increase “systemic risk” by using “all micro and macro-prudential instruments to ensure financial stability.”
“Everyone will benefit.”
Regarding the implementation of European directives on markets for financial instruments and payment services, Centeno acknowledged that they were a “major challenge” for the national banks but stressed that “everyone will benefit.”
“The new legislation – and we are fully aware of this – is a major challenge for banks and financial intermediaries, but everyone will benefit from a more transparent market, with better regulation and supervision which is, therefore, more attractive to investors,” Mr Centeno stated while speaking at the conclusion of the Banking Summit on applied technology in the sector, in Lisbon.
Speaking of a “European financial services market that is more integrated and adapted to the digital medium,” the minister spoke on the importance of the application of the two European directives. This includes, of course, the European Markets in Financial Instruments Directive, which amends the rules on the marketing of financial products.
“The Portuguese government has already approved the bill transposing the directive, which will also be discussed briefly in the Assembly of the Republic,” Mr Centeno stated, stressing that the law “enhances protections for small investors and increases the transparency of services provided by financial institutions.”
Payment Directive
At the same time, according to Centeno, the Portuguese government is “finalising” the implementation of the directive on payment services, which aims to develop a “single market for electronic payments,” he said.
These efforts to transpose European standards are part of a broader effort to deepen the European banking union. “While some steps are being taken, others are lacking,” he stated.
The new bank payments directive will bring significant changes for banks, which will be forced to share customer data with competitors, such as fintechs.
The entry into force of this directive was scheduled for mid-January but has not yet been transposed into Portuguese legislation, so the impacts in Portugal will only be felt later.
The directive permits the entry of new operators into payment services, such as service providers who aggregate customer’s financial information. This would allow clients to merge data from several bank accounts into one platform, even from different banks.
For its part, the Markets in Financial Instruments Directive introduces changes to the regulatory regime for financial intermediation and trading of financial instruments and the marketing of banking products.
At stake is brokerage, consulting, trading, portfolio management and the underwriting of financial products carried out by banks and/or investment firms.
This directive should have entered into force in all Member States on January 3. However, there are several countries where the legislative process is lagging, including Portugal.
In his speech, Minister Centeno also noted that “the Portuguese financial system has evolved a lot,” but admitted that there are “steps to be taken”, since “everything that has been done will only make sense in a context where the European single market is extended to financial services.”
“In this way, our banks, companies and citizens will have more opportunities and their activities will be more secure,” he said, speaking of a “safe path.”
Portugal’s success
Mário Centeno also devoted much of his speech to the Portuguese government’s economic policy, stating that the “Portuguese economy is now a European success story” and that it is “experiencing the greatest growth of this century”, with increases in exports and investment.
The minister also highlighted the labour market and the “288,000 net jobs that were created in the last two years,” with the accompanying reduction in the unemployment rate.
“There has been a significant advancement in Portugal’s labour market which is being reflected in wages, which are growing at all levels,” he stated.
Original Story: TvI24
Translation: Richard Turner