IMF applauds Portugal’s €13 bn-NPL reduction in two years

The International Monetary Fund (IMF) praises the recovery of the banking system in Portugal. And this is due to the national institutions’ efforts in significantly reducing bad debt, which has fallen by over €13 billion(bn) from its peak in mid-2016. For the entity headed by Christine Lagarde, the pace of “cleaning” distressed assets will allow financial institutions to meet or even exceed their reduction goals. Nevertheless, IMF’s leader warns about the necessity of keeping up these efforts in order to return to profitability.

“Capital ratios have increased, at the same time that NPL stock has fallen more than €13 billion in face of the peak achieved in mid 2016”, notes IMF in the report about Article IV Mission, released on May. This pace, states the international entity, “is consistent with meeting or exceeding the bank’s NPL reduction objectives”.

Nevertheless, IMF stresses that banks need to go further on these efforts. “While these are encouraging results, additional progress is needed to strengthen bank’s profitability. This will help them absorb additional costs that might arise from MREL and also to provide support to economy”, says the release.

In addition, bank’s supervisors “should continue to encourage Banks to strengthen further their corporate governance and risk management, while persevering in their NPL- reduction and cost-cutting strategies to generate internal capital”.

Original Story: Eco (Rita Atalaia)
Photograph: Kristi Blokhin/Shutterstock
Translation and Edition: Prime Yield