Banco de Portugal Lobbies the Government to Bind the DSTI Macroprudential Recommendation by Law as Álvaro Santos Pereira's May Estabilidade Financeira Brands Housing-Price Correction the Top Systemic Risk
Governor Santos Pereira used the 27 May Financial Stability Report to ask the Government to convert the DSTI macroprudential recommendation into a binding rule, one week after opening a consultation on cutting the cap from 50% to 45% or 40%.
Governor Álvaro Santos Pereira used the presentation of the Banco de Portugal's May 2026 Relatório de Estabilidade Financeira on Wednesday 27 May to formally ask the Portuguese Government to convert the DSTI macroprudential recommendation into a binding instrument — a request that lands one week after the regulator opened a banking-sector consultation on reducing the maximum debt-service-to-income ceiling from the current 50% to 45% (with the possibility of a 40% floor still on the table).
The legal status of the rule is the central point of the Governor's escalation. Under the Decreto-Lei 157/2014 framework, the macroprudential measure addressed to retail-credit institutions is a recommendation — banks may deviate from the DSTI cap, the LTV cap and the maturity ceiling on the basis of internal justification, subject to ex-post supervisory review. Santos Pereira has consistently flagged, since taking office in October 2025, that several other Eurosystem central banks already operate binding macroprudential frameworks and that “rules are essential to guarantee that the problems of the past do not recur”. The Wednesday request crystallises the position: the Banco de Portugal wants Parliament-grade backing for the DSTI floor rather than the ongoing comply-or-explain regime.
The Relatório itself frames the timing. The May tape designates a residential-property-price correction as the single largest financial-stability risk currently facing the Portuguese system, layered on top of the 17.6% residential price reading captured in the most recent INE house-price tape and the +10.1% commercial-property IPPCom number released earlier in the week. The Banco de Portugal also recorded a parallel increase in average mortgage maturities — pulled upwards by the under-35 guarantee scheme that allows 40-year contracts at 100% LTV — which Santos Pereira has previously flagged as inconsistent with the supervisor's 30-year average benchmark.
The 20 May consultation paper sent to credit institutions canvasses three levers in parallel. First, the DSTI ceiling itself, with the 50%→45% reduction the headline option and a 40% scenario still being modelled. Second, the size of the deviation pool — currently 10% of each institution's semestral credit volume may carry a DSTI of up to 60%, with an extra 5% allowed to exceed even that — both quotas would be tightened. Third, an explicit maturity ceiling that aligns originated contracts with the supervisor's average benchmark. The consultation closes before the Banco de Portugal's June macroprudential committee, after which the recommendation note will be re-issued.
The banks have not converged on the consultation. Public commentary from BCP and BPI executives during the spring earnings cycle defended a partial flexibilisation rather than a tightening — particularly the option of 100% LTV for young first-time buyers — a position Santos Pereira rejected at the BdP's annual sector meeting and again on Wednesday. Crédito Agrícola, with the smallest mortgage book among the listed names, has stayed quiet on the cap itself but signalled openness to maturity changes.
For prospective borrowers, the practical takeaway is that the credit envelope is moving against them on three vectors simultaneously: a lower DSTI cap, a tighter deviation pool and a shorter contractual maturity. The Government has not yet replied to the binding-status request, but Ministério das Finanças officials briefed Lusa earlier on Wednesday that the recommendation track will be re-evaluated against the broader housing-package legislative cycle now passing through the Assembleia da República.
