Bank of Portugal quizzes banks over low mortgage spread rates

The Bank of Portugal, lead by Álvaro Santos Pereira, has asked the banks if the low mortgage spread rates they are charging accurately reflect all of the inherent costs in providing a home loan.

These costs not only include the cost of financing, but operational and administrative costs, credit risk insurance, competition aspects and market conditions, among others.

According to Banco de Portugal, this supervisory action across the main financial institutions aims to verify compliance with guidelines from the European Banking Authority (EBA) on the granting and monitoring of credit.

However, not all banks have yet been questioned: the inquiries have already been made to BCP and CGD, but BPI and Novobanco, for example, have not yet received them.

The supervisor’s initiative comes at a time when the number of mortgages granted is soaring 10.4% year-on-year, according to January data, registering the highest growth since 2006.

The banks have been lowering loan spreads, following increased competition, the low cost of risk and the low cost of capital.

The market has played down the BoP’s inspections, saying that “it is perfectly within the scope of a supervisor’s work”. “Pricing of credit granted and credit granting criteria are part of the usual range of supervisory audits that the Bank of Portugal carries out”, points out a sector source.

Source: Jornal Ecónomico, Credits: Bank of Portugal