Portuguese banking group warns against transactions tax

LISBON Wed Oct 10, 2012 5:13am EDT

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LISBON Oct 10 (Reuters) - A European financial transactions tax would put Portuguese banks in a competitive disadvantage and may further complicate lending to the economy in a crisis-hit country already deep in recession, the head of its banking association said.

"Its application in just some member states would provoke market distortions with very negative consequences for the countries that impose it early," Fernando Faria de Oliveira wrote in an e-mailed reply on Wednesday to questions from Reuters.

But it was not yet clear if the measure would be taken, he said, adding he hoped it would at least not feature in the 2013 budget.

Eleven euro zone countries agreed on Tuesday to push ahead with a tax on their financial transactions, an initiative that several other EU nations oppose but which has been pushed hard by Germany and France.

"It would be a significant competitive disadvantage for the Portuguese banking system that is solid and solvent," wrote Faria de Oliveira, who is also board chairman at the country's largest bank Caixa Geral de Depositos.

Although frozen out of the interbank funding market due to the sovereign debt crisis, Portuguese banks have improved their capital ratios to meet European solvency requirements. But lending to the recession-struck economy has been sliding as bad loans are mounting.

"Aside from an impact on banks' profitability, such a measure could aggravate lending conditions to companies and individuals that are already much worse than those practiced in countries not affected by the crisis. It could also affect their recourse to the capital market," Faria de Oliveira wrote. (Reporting By Sergio Goncalves, writing by Andrei Khalip; editing by Ron Askew)

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