 Assessing the effectiveness of the Portuguese borrower-based measure in the Covid-19 contextWorking Papers from Banco de Portugal, Economics and Research Department Abstract: Based on the macroeconomic projections from Banco de Portugal and using an integrated micro-macro model developed by Gross and Población (2017), this paper makes a first attempt at gauging the impact of the Covid-19 pandemic on Portuguese households and banks. To this end, we examine how the borrower-based measure, which has been put into place in 2018, might have been successful in dampening the negative economic effects of the pandemic on households’ debt-servicing capacities and thereby onto the banking system. We find that the borrower-based measure, defined as an LTV ratio cap of 90%, a shocked DSTI ratio cap of 50%, and a maturity cap for mortgage loans of 40 years, leads to (i) a reduction in households’ loss rate (LR), caused by both a decrease in households’ probability of default (PD) and loss given default (LGD), and (ii) an increase in the capital ratio of the banking system, compared with a scenario where these limits are not in place. We also find positive effects of introducing a shocked DSTI ratio cap, calculated according to the Portuguese borrower-based measure, as it further (i) decreases the risk parameters of the borrowers and (ii) increases the capital ratio of banks. JEL-codes: G01 G21 G51 (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ptu:wpaper:w202110 Access Statistics for this paper More papers in Working Papers from Banco de Portugal, Economics and Research Department Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.