July 8, 2014 / 2:42 PM / in 4 years

Portugal banks' ECB borrowing falls sharply again, ignores BES

LISBON, July 8 (Reuters) - Portuguese banks’ borrowing from the European Central Bank fell over 9 percent in June from May to around 38.4 billion euros ($52 billion) - its lowest level since late 2010, central bank data showed on Tuesday.

The sharp fall, underlining recovery from the crisis that left Portuguese banks unable to borrow commercially in 2011, came despite concerns surrounding the founding family of Portugal’s largest listed bank by assets, Banco Espirito Santo .

In late May, Banco Espirito Santo warned of material irregularities at a holding company owned by the Espirito Santo family that holds a large stake in the bank.

The Bank of Portugal has since said BES has solid solvency ratios and is isolated from the problems at the holding company. The family lost control of BES in a capital increase in June and the central bank has insisted on a new leadership team.

“So far there has been no visible impact from BES-related issues on banks’ debt refinancing needs, but there is a risk of them going up in the third quarter... Banks’ credit default swaps are higher now than a couple of months ago,” said Andre Rodrigues, an analyst at Caixa BI.

The fall in borrowing from the ECB was the sharpest since the trend began nine months ago. Portugal started to recover last year from its worst recession since the 1970s and completed its international bailout in May.

At the height of the crisis, the banks borrowed a record 60.5 billion euros in June 2012. Although the figures have come down, the borrowing is still far higher than in 2009, before the crisis struck and when banks rarely took more than 10 billion euros in ECB liquidity.

$1 = 0.7331 Euros Reporting by Andrei Khalip; Editing by Ruth Pitchford

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