LISBON (Reuters) - Portugal will extend its suspension of loan repayments by another six months until March so as to avoid an expected jump in bad debt as a result of the crisis caused by the coronavirus pandemic, Prime Minister Antonio Costa said on Thursday.
The suspension, in place since March, can be applied on bank loans to companies and individuals, including on household mortgages.
Finance Minister Mario Centeno said last month that the scheme, originally due to expire in September, had already led to the postponement of 12 billion euros in interest and capital payments, and that the government would extend it as needed to avoid jeopardising the banking system with a jump in bad loans.
Top executives of the five largest banks in Portugal, which together control over 80% of the country’s banking system assets, had already requested this extension.
Portugal, which saw a sharp increase in bad loans after its 2010-2013 economic and debt crisis, is expected to suffer a steep economic contraction this year.
Since the last crisis, Portuguese banks reduced non-performing loans to 17.2 billion euros ($18.7 billion) in December 2019 from a peak of 50 billion euros in June 2016. Still, its NPL ratio of 6.1% of total credit was about twice the European average.
Reporting by Sergio Goncalves and Andrei Khalip