Portuguese banks capital adjustment

• Autor(a) principal: Amaro, Manuel João Pedro
• Data de Publicação: 2020
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10071/21723
• topic: Basel III; Capital adequacy; Capital ratios; Capital requirements; Basileia III; Adequação de capital; Rácios de capital; Requisitos de capital

The financial crisis in 2007-08, the European debt crisis, which started in late 2009 and the 2011-14 financial assistance program reinforced the need towards a more capitalized banking system. To this end, the Basel III reforms were adopted in the EU and started to take effect in Portugal in 2014. This regulatory package imposed on banks more demanding capital requirements. The study intends to investigate the strategies and adjustments carried out between 2010 and 2018 for the six most significant Portuguese banks in order to meet the new regulatory requirements. In order to achieve higher capital ratios, institutions adjusted their business models, portfolios and balance sheet structure. In this sense, the analysis focuses on the evolution of the various elements that make up regulatory capital and risk-weighted assets and their impact on the capital adequacy ratio of Portuguese banks. The results of the study point out that most institutions adjusted mainly through the reduction of RWAs. On the one hand, this reduction in RWAs derived from the global reduction in assets, being the most determining factor in CARs increase. On the other hand, the progressive reduction in the average risk-weight had a significant contribution to improve banks’ capital adequacy. The capital component contributed negatively to the evolution of the CAR, mainly due to the low profitability of the Portuguese banking sector. However, the change in regulatory capital played a secondary role.