The Bank of Portugal has published its Financial Stability Report, finding that risks have increased amid geopolitical tensions and the potential for a sudden, disorderly financial market correction. The possibility that macroeconomic, financial, geopolitical and climate shocks materialize simultaneously could amplify their effects on Portugal, although the banking system retains historically high profitability, capital and liquidity levels. A residential real estate price correction remains a major risk as supply constraints and robust demand, including from government measures and foreign buyers, continue to push up prices. Household vulnerabilities have also increased as the saving rate has declined and mortgage lending has reversed the downward trend in indebtedness. Operational and cybersecurity risks are rising with digitalization, artificial intelligence and reliance on external providers and critical infrastructure, reinforcing the need to implement DORA and strengthen operational resilience. Existing macroprudential measures include a 0.75% countercyclical capital buffer introduced in 2026 and the recommendation covering new housing and consumer credit. The Bank of Portugal will monitor financial stability risks and stands ready to adjust macroprudential instruments where necessary.
2026-05-27Bank of Portugal
Bank of Portugal reports rising financial stability risks while banks retain strong buffers
The Bank of Portugal reported higher financial stability risks from geopolitical tensions, a potential market correction, residential real estate and increasingly interconnected climate and cyber threats. Banks retain strong profitability, capital and liquidity, supported by macroprudential measures including a 0.75% countercyclical capital buffer.