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Portuguese banks turn to bailout fund for capital

04 June 2012 15:01 (UTC +04:00)

Baku - APA-Economics. Three leading Portuguese banks said on Monday they would draw on funds provided under the country’s 78 billion-euro ($96-billion)international bailout to meet tough new capital requirements as they struggle with the country’s debt crisis, BusinessLIVE reported.

Millennium bcp, Portugal’s largest private bank in terms of assets, said it would draw 3 billion euros from the bailout fund’s "recapitalisation line" while Banco BPI will draw 1.2 billion euros.

State-owned Caixa Geral de Depositos will draw 1.65 billion euros.

The move by the three banks was expected and leaves only Banco Espirito Santo (BES) among Portugal’s leading banks without state funding. BES has said it does not intend to draw on state funding.

Under Portugal’s bailout from the European Union and IMF, 12 billion euros was set aside for the recapitalisation of its banks.

"The participating banks will be among the best capitalised in Europe," the finance ministry said in a statement. "In this way they will be well positioned to continue to ensure access to credit to the Portuguese economy."

Portugal’s banks have effectively been cut off from European capital markets for nearly two years since the country entered its worst recession since the 1970s under the weight of sweeping austerity measures.

Under Portugal’s bailout terms, the country’s banks need to have core Tier 1 capital ratios of 10 percent of assets by the end of this year.

Millennium said it would raise a further 500 million euros through a rights issue to shareholders while Banco BPI will raise another 200 million from shareholders.

Shares in Millennium were unchanged at 0.10 euros per share on Monday while BPI was up 4.9 percent at 0.40 euros per share.

Many economists have said Portugal is likely to need more funding for its bailout, or to extend its terms. Still, the finance minister said on Monday that the country had passed the fourth review of the economy under the bailout.