The Increasing Consumer Complaints Have Caused Heavy Reputational Damage To The Portuguese Banks. Essay Samples
Banking is one of the biggest industries worldwide. The efficiency of the banking sector determines economic growth of a country. Banks serves as a medium of transferring funds from lenders to the borrowers; the medium in which these funds are invested determines the social risk of a client. In Portugal, private clients account for 55.6% of the total credit given by the banks.
After nationalization of banks in Portugal in 1975, Bank of Portugal was the head bank. Recession soon crept in the economy and to tackle it in 1990 restructuring started with the Financial Investment. The Spanish influence was harming the Portugal Banking Industry. Still there are many challenges that pose threat to the Banking sector in Portugal.
The increasing amount of Public Debt which is more than 120% of the total GDP; the corporate debt is also very high. The enterprises are unable to fulfill their debt obligations. This increases the deficit for the banks.
The recessionary trend accompanied by poor tax revenues has added to the problem of doubtful debts and increasing financial cost for banks as they are unable to absorb losses.
The borrowing interest rates vary across member states of the Monetary Union; it has increased the interest rate of borrowing. There are different wholesale and retail interest rates of borrowing; adding to the ambiguity of the banking sector.
Portugal is undergoing an Economic Adjustment Program; it has resulted in over borrowing, increasing the external deficit and eventually increased dependence on foreign funding. Savings in Portugal account only for 11% of the GDP.
The Bank credit availability in Portugal is limited for small and medium sized enterprises. The potential for growth in financial products is limited as Portuguese market is small.
The credit risk are high as the credit is used in activities that produce harmful social and environmental effects; leading to a decline in asset quality.
The international banks offer tough competition as they have greater sustainability. Portuguese banks do not participate in international forums; they are not members of UN EP FI and UN PRL (organizations for sustainable banking).
With adequate recapitalization and reduced credit borrowing economic growth can be sustained in Portugal’s Banking industry.
Daniel,Amaral. Pedro, Barbosa. Environmental and social aspects in Portugal’s banking and insurance sector.2007. Retrieved from.
Fernando Faria de Oliveira .The challenges of adjustment and growth. American chamber of commerce in Portugal. November 2012.Retrieved from.