ECB Financing to Portuguese Lenders Declined for a Second Month in October

The European Central Bank’s financing to Portuguese lenders fell in October from the previous month, a second monthly decline, the Bank of Portugal said.

ECB financing decreased to 45.54 billion euros ($62.6 billion) from 45.62 billion euros in September, the Lisbon-based Portuguese central bank said today on its website. ECB financing levels peaked at 49.1 billion euros in August 2010.

Portugal became the third euro-area country to seek a bailout in April after Greece and Ireland. It will receive 78 billion euros under the agreement with the International Monetary Fund and the European Union. 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 if needed.

Banco BPI SA (BPI) and Banco Comercial Portugues SA (BCP) said on Oct. 27 they would study different options to meet new capital requirements estimated by the European Banking Authority. All of Portugal’s lenders passed the EBA’s stress tests in July with core Tier 1 capital ratios higher than the 5 percent minimum requirement.

The Bank of Portugal said on May 12 that 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 must rise to at least 10 percent by the end of 2012.

The second review of Portugal’s aid program starts today. Portuguese Prime Minister Pedro Passos Coelho said on Oct. 25 that it’s “crucial” to find a solution for the refinancing of state companies’ debts and that this issue will be discussed with EU and IMF officials.

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

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

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