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Portuguese banking group warns against transactions tax

LISBON, Oct 10 (Reuters) - A European financial transactionstax would put Portuguese banks in a competitive disadvantage andmay further complicate lending to the economy in a crisis-hitcountry already deep in recession, the head of its bankingassociation said.

"Its application in just some member states would provokemarket distortions with very negative consequences for thecountries that impose it early," Fernando Faria de Oliveirawrote in an e-mailed reply on Wednesday to questions fromReuters.

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

Eleven euro zone countries agreed on Tuesday to push aheadwith a tax on their financial transactions, an initiative thatseveral other EU nations oppose but which has been pushed hardby Germany and France.

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

Although frozen out of the interbank funding market due tothe sovereign debt crisis, Portuguese banks have improved theircapital ratios to meet European solvency requirements. Butlending to the recession-struck economy has been sliding as badloans are mounting.

"Aside from an impact on banks' profitability, such ameasure could aggravate lending conditions to companies andindividuals that are already much worse than those practiced incountries not affected by the crisis. It could also affect theirrecourse to the capital market," Faria de Oliveira wrote.

(Reporting By Sergio Goncalves, writing by Andrei Khalip;editing by Ron Askew)

((andrei.khalip@thomsonreuters.com)(351)(213-509-209)(Reuters

Messaging: andrei.khalip.thomsonreuters.com@reuters.net))

Keywords: PORTUGAL BAKS/TAX