August 28, 2014 / 8:31 AM / in 3 years

Steepest fall in Portuguese bank lending on record in July

FRANKFURT, Aug 28 (Reuters) - Lending to companies and households in Portugal fell at the fastest rate since records started in January 2004 in July, data from the European Central Bank showed on Thursday, highlighting one of the impediments to growth in the euro zone.

The currency bloc is slowly emerging from the worst crisis since it was founded in 1999 as many members are scaling back government spending, reining in debt and reforming their labour markets, while banks are still reluctant to lend in some parts.

ECB data on Friday showed that the situation is only slowly improving, particularly in countries hit most by the crisis. Lending in Portugal continued to decline in July, falling by 7.8 percent compared to a year earlier, the fastest decline since ECB data records started.

Lending also declined in Ireland, at an annual rate of 11.7 percent in July, the strongest decline since August 2011, data showed.

Spain posted a 9-percent drop in lending to the private sector in July compared with a decline of 8.9 percent in the previous month.

The ECB has cut interest rates to record lows and will offer banks more long-term funding at ultra-cheap rates later this year to encourage them to lend more freely. (Reporting by Eva Taylor; Editing by Toby Chopra)

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