Por­tuguese cbank warns over fi­nances

The Pak Banker - - Company& -

LIS­BON: Por­tuguese banks will face an "un­bear­able" level of risk and find it dif­fi­cult to re­fi­nance their debt if the coun­try fails to im­ple­ment cred­i­ble mea­sures to con­sol­i­date its pub­lic fi­nances, the Bank of Por­tu­gal has warned.

The warn­ing came as yields on Por­tuguese govern­ment bonds con­tin­ued to rise at close to euro-era highs amid per­sis­tent in­vestor fears that the coun­try would be forced to fol­low Greece and Ire­land in re­quest­ing an in­ter­na­tional fi­nan­cial bail-out. Risks to the Por­tuguese fi­nan­cial sec­tor would "be­come un­bear­able if po­lit­i­cal mea­sures to con­sol­i­date pub­lic fi­nances are not im­ple­mented in a cred­i­ble and sus­tained way", the re­port said, urg­ing banks to in­crease pro­vi­sions and strengthen their cap­i­tal. Car­los Peixoto, a Lis­bon­based an­a­lyst with Banco BPI, said: "The re­port out­lines a dif­fi­cult sce­nario for Por­tuguese banks. "We ex­pect the sec­tor to con­tinue to be pe­nalised by sov­er­eign debt con­cerns".

Por­tu­gal has held up its "re­silient and well-cap­i­talised" bank­ing sec­tor as an as­set that de­mar­cates the coun­try from Ire­land, where large bank­ing losses have been blamed for its sov­er­eign debt cri­sis.

Ac­cord­ing to the cen­tral bank re­port, Por­tuguese banks face "no in­trin­sic prof­itabil­ity or sol­vency prob­lems" and have shown "a no­table ca­pac­ity to re­sist and adapt".

But since a down­grad­ing of Por­tu­gal's sov­er­eign debt rat­ing in April, its banks have been vir­tu­ally frozen out of in­ter­na­tional cap­i­tal mar­kets, mak­ing them al­most wholly re­liant on ECB fund­ing. The cen­tral bank said no Por­tuguese bank had suc­ceeded in mak­ing an in­ter­na­tional debt is­sue since April, while net bond is­sues by banks in the first nine months of 2010 were neg­a­tive - that is, in­suf­fi­cient to off­set bonds ma­tur­ing in the same pe­riod. -PB News

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