The Portuguese Banking System During the Sovereign Debt Crisis

Banco de Portugal Economic Studies, 1(2), pp.43-80, July 2015

38 Pages Posted: 29 Jul 2015

See all articles by Matteo Crosignani

Matteo Crosignani

Federal Reserve Banks - Federal Reserve Bank of New York

Miguel Faria-e-Castro

Federal Reserve Bank of St. Louis

Luís Fonseca

London Business School - Department of Economics

Date Written: July 2015

Abstract

We describe the evolution of balance sheets of monetary financial institutions (MFI) in Portugal before, during, and after the sovereign debt crisis of the late 2000’s. We account for several dimensions of heterogeneity including size, type, and nationality. We find that the Portuguese MFI sector rapidly expanded and increased its leverage before and during the crisis until 2012, after which it started a long deleveraging process. Many of the major aggregates, such as lending and deposits, follow this pattern. We observe a steady rise of non-traditional banking activities on both sides of the balance sheet of domestic institutions. The crisis weakened the international integration of the Portuguese financial sector, as domestic banks became less exposed to international counterparties. Finally, the Eurosystem and the Portuguese government have become relevant sources of funding as a result of the recent unprecedented monetary and fiscal interventions in the domestic financial system.

Keywords: Eurozone Debt Crisis, ECB

JEL Classification: E50, E58, G20, G21, H63

Suggested Citation

Crosignani, Matteo and Faria-e-Castro, Miguel and Fonseca, Luís, The Portuguese Banking System During the Sovereign Debt Crisis (July 2015). Banco de Portugal Economic Studies, 1(2), pp.43-80, July 2015, Available at SSRN: https://ssrn.com/abstract=2636311

Matteo Crosignani (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
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Miguel Faria-e-Castro

Federal Reserve Bank of St. Louis ( email )

411 Locust St
Saint Louis, MO 63011
United States

Luís Fonseca

London Business School - Department of Economics ( email )

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Regent's Park
London NW1 4SA
United Kingdom

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