Portuguese parties give the green light to negative interests’ credit for home loans

During the Commission for Budget, Finance and Administrative Modernization (COFMA), the Portuguese political parties gave their green light to the proposal present by the Socialist Party (PS) and Left Block (BE) of changing the law so that banking clients can have a return of home interests concerning the period in which they stand in negative grounds. This is a proposal that has been criticized by many banks.

The proposal, which was now unanimously approved by the parliamentary groups, will still need to have a final global voting before heading to the Presidential office. With the approval of these changes, banking clients who took a home loan will have the right to an interest credit any time the interest rate for that loan stands at negative grounds. This credit will be returned in other tranches. The measure will be valid for new and current contracts, but will not have retroactive effects.

The initiative came about following an agreement with PS and BE, because the leftists had submitted a draft bill that made it mandatory for banking institutions to fully reflect the Euribor decrease in home and consumption credit contracts. Socialists chose another path, proposing a change in order to “delay” the return of those interests by banks to clients until the interest rate took on positive amounts.

This measure has been criticized by banks. The Portuguese Banking Association believes it is “a principle of economic irrationality”. To ECO, the spokes-person for PS, João Galamba, considers the criticism from the sector are “incomprehensible” and that the impact “will hardly surpass ten million euros”.