LISBON, April 24 The Bank of Portugal on Wednesday said the bailed out country's banks were well-capitalised, dismissing a recent assessment made by ratings agency Moody's that the lenders would need at least 8 billion euros ($10.4 billion) in extra capital.
"Technically, these calculations by Moody's are based on principles that are not used by us (Bank of Portugal) nor by the other European authorities. We trust our evaluations," Bank of Portugal Governor Carlos Costa told a parliament commission.
The rating agency's lead analyst for Portuguese banks said two weeks ago that banks' non-performing loans had risen more than expected because of the country's deepening recession, justifying the need for extra capital. The Bank of Portugal has long argued the lenders have enough capital.
"It's not questionable - our banks have comparable capital ratios with Europe and a comfortable liquidity position. Portuguese banks are well-capitalised, what they need is to increase profitability," said Costa, who sits on the European Central Bank's governing council.
He backed the Portuguese Banking Association's rejection of the agency's estimates.
Portuguese banks increased their core Tier 1 capital ratios to an average of 11.5 percent at the end of last year from just 6.8 in 2008, when the global financial crisis struck. They have so far met all solvency targets set by the European Banking Authority and the Bank of Portugal.
Banks have used about half of the banking recapitalisation line from Portugal's EU/IMF bailout, leaving around 6 billion euros left. The banking association said this would be enough to cover any potential shortage if such were discovered by new European Banking Authority stress tests scheduled for mid-2014.
Banks have also been reducing their dependence on ECB emergency liquidity and have started to issue bonds again.
Costa said banks were willing to provide loans to an economy mired in its worst recession since the 1970s and the volume of loans to exporting companies has increased lately.
Financing dried up with the advent of Portugal's debt crisis in 2010 and still remains restricted overall, according to a poll of lenders by the Bank of Portugal released on Wednesday. It showed access to credit and lending terms were practically unchanged in the first quarter.
Costa said cuts in corporate tax proposed by the government on Tuesday "will be a good measure" to stimulate the economy. ($1 = 0.7683 euros) (Reporting By Sergio Goncalves, writing by Andrei Khalip; editing by Patrick Graham)