Bloomberg News

ECB Financing to Portuguese Banks Fell to 45.6 Billion Euros

October 10, 2011

(Adds details on financial-aid plan starting in third paragraph. See EXT4 <GO> for more on the sovereign-debt crisis.)

Oct. 10 (Bloomberg) -- The European Central Bank’s financing to Portuguese lenders fell in September from the previous month, the first decline in three months, the Bank of Portugal said.

ECB financing decreased to 45.6 billion euros ($62 billion) from 46 billion euros in August, the Lisbon-based Bank of Portugal said today on the BPStat portion of its website. ECB financing levels peaked at 49.1 billion euros in August 2010.

Portugal in April became the third euro-area country to seek a bailout after Greece and Ireland. It will receive 78 billion euros under the agreement with the International Monetary Fund and the European Union. ECB President Jean-Claude Trichet said on April 7 that the central bank “encouraged” Portugal to seek aid and urged the country’s banks to reduce their reliance on ECB funding.

Portuguese lenders have turned to the ECB because the government’s struggle to narrow its budget deficit has restricted their ability to borrow. The aid plan earmarks 12 billion euros for Portugal’s lenders.

Moody’s Investors Service cut the debt ratings of nine Portuguese banks by one or two levels on Oct. 7, citing concerns about funding, bad loans and holdings of government debt. Moody’s lowered the “standalone” ratings of three banks, Banco Espirito Santo SA, Banco Comercial Portugues SA and Banco BPI SA, by two levels, the company said in a statement.

Stress Tests

On May 12, the Bank of Portugal said domestic banks must have a core Tier 1 capital ratio of at least 9 percent by the end of this year, as set out in the bailout package. That ratio must be at least 10 percent by the end of 2012.

All of Portugal’s lenders passed the European Banking Authority’s stress tests in July with core Tier 1 capital ratios higher than the 5 percent minimum requirement. Still, Portugal’s central bank said on July 15 that Banco Comercial and Espirito Santo Financial Group SA should reinforce capital so they can exceed the minimum capital level “even more comfortably” and established a reference level of 6 percent.

--Editors: Jennifer M. Freedman, Leon Mangasarian

To contact the reporters on this story: Joao Lima in Lisbon at jlima1@bloomberg.net

To contact the editors responsible for this story: Tim Quinson at tquinson@bloomberg.net


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