TALK ON THE IMPACT OF THE RISE OF INTEREST RATES

Description

After a 14-year decline, 6 of which in negative territory, since February 2022, we have witnessed a consistent rise in Euribor interest rates, which today reach values of around 2.8% (12 months) and 2.3% (6 months).
This trend is not expected to stop soon. On the contrary, the climbing - the ECB tells us - will continue, in an effort to control a galloping inflation.
At the same time the World Bank issued in September 2022 a report under a very auspicious title, “Is a global recession eminent”, where we are warned that “the world may be edging toward a global recession in 2023 and a string of financial crises in emerging markets”. David Malpass, president of the World Bank, also stated that rate hikes are also ill-suited to address current inflation, which is driven mainly by exorbitant energy prices.

Vitor Constâncio, a former ECB vice-president, and former president of the BdP, qualified in Italian newspaper La Stampa the ECB’s September 2022 75-basis-point increase as "risky mistake" because of the likely chance the European economy will enter a recession before the end of the year.

The Portuguese Government, as well as other MS’ governments, has been vocal in expressing their opposition to the ECB’s policy.

The fact is the impact of the rise of interest rates in economies and society is yet to be determined.

In this context, very recently, on the 3rd of November – last week -, a Decree-law was passed by the Portuguese Government to address the distress caused in mortgage credit agreements by the hiking of interest rates. Measures taken encompass (i) an obligation of banks to monitor clients’ effort rates (ii) an obligation of banks to negotiate credit agreements and (iii) a temporary suspension of early repayment compensation when interest rates due are floating.

The purpose of this talk, with the central players in the banking market in Portugal, is to help us understand and navigate through these recent changes, answering questions as simple – questions are simple, the answers not so much - as:
• why interest rates are climbing?
• how are banks reacting?
• what are the bank associations and the supervisor doing in respect of this? Should they act? And if so how?
• Should governments act? If so, how?
• what should debtors, in particular consumers, do to mitigate the negative impact of the increase of interest rates? Is it too late to react?
We are very lucky to have here today, at a table chaired by Alexandra Valente, partner of SRS Finance department, a panel of distinguished guests qualified to help us think and discuss these topics.
I cannot stress how much we thank you for having accepted our invitation.
Alexandra, the floor is yours.
Maria Lúcia Leitão, Head of the Banking Prudential Supervision Department (DSP), Banco de Portugal, to give us the BdP’s perspective,
Vinay Pranjivan, Senior Economist/Advisor in consumer protection for financial services DECO, a Member of the working group as an expert on consumer protection in financial services, European Commission, Member of the European Banking Authority's Banking Stakeholders Group (EBA BSG), to give us the consumer’s perspective and an insight in EU’s institutions, such as the Commission and EBA, perspective also,
Pedro Brinca, Assistant Professor Nova SBE, with extensive expertise in the area, to help us understand why are interest rates fluctuating
Patrícia Fonseca, Head of Legal, Novobanco, to give us the perspective of a bank, a bank of significative importance
And, finally, also to help us understand the bank’s perspective and what has been done in terms of best practices,
Ana Moucho, Deputy Secretary- General, Portuguese Bank Association (APB).
Each guest will have a short intervention, to which a discussion will follow.
Answers to the following questions will be the core of the talk: “Why are interests rates suddenly increasing?”; “How are banks reacting?”; “What are the bank associations doing?”; “Will the supervisors have any intervention in this matter?”; “Should they have an intervention?“; “What should debtors, in particular consumers, do to mitigate the negative impact of the increase of interest rates?“
In the context of the discussion that will be chaired by Alexandra Valente, the audience is invited and incentivized to participate.

Period	9 Nov 2022
Event type	Conference
Location	Lisbon, PortugalShow on map