PORTUGAL Law and Practice Contributed by: Manuel Requicha Ferreira and Diana Avillez Caldeira, Cuatrecasas
1. Loan Market Overview 1.1 The Regulatory Environment and Economic Background
are continuing to see an increase in direct lending because of the more stringent conditions imposed on banks to provide financing. 1.2 Impact of Global Conflicts Although the primary effects of the war in Ukraine (increase in the prices of raw materials, energy and food, with consequent inflationary pressures that led to the raising of interest rates by the ECB) lost steam (as mentioned in 1.1 The Regulatory Environment and Economic Background ), the effects of global conflicts – particularly in Ukraine and the Middle East – on the Portuguese loan market continue to be felt. This is primarily because of increased economic uncertainty, with companies postponing or scaling back investment plans and relying more on internal sources of financing and banks pursuing cautious lending practices. Furthermore, the escalation of trade tensions, notably the introduction of new tariffs on European exports by the United States, had a pronounced impact on export-oriented sectors of the Portuguese economy. Companies operating in these sectors have faced greater unpredictability regarding demand and costs, leading to a more cautious approach to investment and borrowing. Banks, in turn, have adopted prudent lending standards for clients exposed to international markets and supply chain risks. At the same time, the energy price shock triggered by the Ukraine war accelerated the transition towards renewable energy in Portugal. This has supported ongoing investment and financing activity in the renewables sector, reinforcing a pre-existing trend towards sustainability and energy independence. 1.3 The High-Yield Market In 2024, and after two challenging years, the Euro- pean high-yield market was quite active. Activity has been driven mainly by refinancing transactions, which accounted for over half of the volume. However, according to published data, activity slowed in the first quarter of 2025, reflecting increased mac- roeconomic uncertainty and the impact of geopolitical events such as the introduction of US tariffs.
Throughout 2024 and the first half of 2025, the Portu- guese loan market was shaped by a combination of signs of macroeconomic stabilisation and persistent external uncertainty. After a period of high inflation and successive interest rate hikes, 2024 saw a notable slowdown in inflation and the beginning of interest rate reductions by the European Central Bank (ECB). This contributed to an improvement in funding condi- tions for companies. However, the overall environment remained cautious, as geopolitical tensions – includ- ing escalating trade barriers and ongoing conflicts – continued to generate uncertainty, particularly for export-oriented sectors. According to the Bank of Portugal’s regular surveys and statistical releases, lending criteria for corpo- rate clients remained broadly unchanged during this period. Banks maintained a prudent and selective approach to credit approvals, with no significant loos- ening of standards. The terms and conditions for new corporate loans, including interest rates and spreads, decreased slightly, reflecting a gradual improvement in funding costs. Nevertheless, banks continued to exercise caution, especially towards sectors more exposed to external shocks, such as manufacturing and industries affected by US tariffs imposed on Euro- pean exports. On the companies’ side, the most recent surveys of the Bank of Portugal suggest a small decrease in the demand for bank loans by large companies (mainly because of the use of internal resources as an alter- native source of financing), but a minor increase in demand for small and medium-sized companies. The Portuguese corporate loan market was thus char- acterised by stable but cautious lending practices, with banks balancing improved funding conditions against persistent external and regulatory risks, and companies remaining conservative in their borrowing and investment decisions. In line with the trend in recent years, and as a result of the current regulatory environment, the authors
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