Page 252 - Special Topic Session (STS) - Volume 3

STS 543 Luís T. D. et al.
Macroprudential Measure on New Credit Agreements for Consumers
With the aim of promoting financial stability, the Bank announced in
February 2018 a macroprudential measure (hereinafter referred to as “the
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Recommendation”) addressed to credit institutions and financial companies.
More specifically, it fosters the adoption of prudent credit standards on loans
granted by the Portuguese financial system to consumers, with the aim of
enhancing the resilience of the financial sector and the sustainability of
households’ financing, thereby minimizing the risk of defaults. Furthermore,
the Bank seeks to prevent excessive risk taking by the financial sector, in a
context where less restrictive credit standards have been observed and are
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expected to become even looser.
This Recommendation, which is based on the “comply-or-explain”
principle, introduced the following terms for new credit granted as from 1 July
2018:
 Limits to the loan-to-value ratio (LTV) – defined as the ratio between
housing loan(s) and the minimum between the purchase price and the
appraisal value of the house granted as collateral;
 Limits to the debt service-to-income ratio (DSTI) – defined as the ratio
between monthly instalments of total credit agreements and the
borrower’s income, net of taxes and contributions to social security;
 Limits to the maturity of loans;
 Requirement of regular payments of interest and capital.

8 The set of recommendations can be found in Banco de Portugal (2018a).
For a detailed analysis of the Recommendation and its justification please see Banco de
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Portugal (2018b).
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