Portugal banks strengthen ratios, austerity threatens-BoP
LISBON Nov 26 (Reuters) - Portuguese banks strengthened their capital buffers adequately in the first half of 2013 but may be hurt by the sustained squeeze on the economy from bailout measures, the Bank of Portugal said on Tuesday.
In its quarterly financial stability report, the central bank said the average core Tier 1 ratio of Portugal's financial sector rose to 11.9 percent by June 2013, from 11.5 percent in 2012.
The central bank, which requires Portuguese banks to meet a 10 percent minimum ratio, said solvency was improving but the sector was vulnerable to the economic impact of more state spending cuts and tax increases required under an EU-IMF bailout.
"The uncertainty over the internal macroeconomic evolution constitutes the main risk for the stability of the financial sector," the central bank wrote.
Falling disposable incomes and overly leveraged companies represent "an important risk" in Portugal, it said. Banks could be hurt further by their exposure to property loans because house prices are expected to keep falling.
Portugal's parliament approved on Tuesday its 2014 budget which includes around 3 billion euros ($4 billion) of spending cuts, most of them cuts in pensions and civil servants' salaries.
Portugal returned to meagre economic growth in the second and third quarters of the year, emerging from its deepest recession in over three decades. ($1 = 0.7404 euros) (Reporting by Sergio Goncalves; Writing by Daniel Alvarenga; Editing by Ruth Pitchford)
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