exposure of the UK to the financial mess in Portugal is comparatively limited.

According to figures from the Bank for International Settlements (the central bankers' central bank, to use the cliche), British banks have lent just $2.6bn (£1.6bn) to the Portuguese public sector.

And the total exposure of UK banks to Portugal - including loans to banks and companies - is $33.7bn or £21bn.

So even if losses on all these loans - through defaults and restructuring - escalated to an implausibly high 33% of value, there would be a headache for our banks, though nothing much worse than that.

Which is one reason why the Chancellor George Osborne will minimise the UK's contribution to the Portuguese bailout.

Quite apart from the political imperative for him of not being seen to prop up a currency union, the eurozone, which doesn't include the UK, the fortunes of the Portuguese economy and financial sector are not of material concern to the UK - unlike Ireland, where British banks and exporters are up to their necks in it.

That said, the UK cannot avoid providing any succour to Portugal. As a result of our commitments to the International Monetary Fund and the European Union's European Stability Mechanism (ESM) Britain could find itself making an implicit contribution to a Portuguese bailout of as much as 5bn euros - or as little as 1bn euros (depending on whether Portugal taps the ESM or just the European Financial Stability Facility, to which the UK does not contribute).

The risks, predictably, are greater for Spanish, German and French banks, with $109bn, $49bn and $46bn of exposure to Portugal respectively.

But even in their cases, direct exposure to the financially challenged Portuguese government is limited: just $33bn of loans for all banks from the three countries together.

And loans to Portugal's public sector by all euro area banks (excluding loans by Portuguese banks) are just $42bn in total.

So if Portugal were eventually to default or to write down the value of its sovereign debt, the direct impact on the eurozone banking system would be embarrassing rather than devastating.

This however is to ignore two other highly relevant concerns.

First is that if Portugal restructures its debts, so as to reduce what it owes, that would probably only happen if Ireland and Greece engaged in similar writedowns.

And cross-border exposure of eurozone banks to public-sector Irish and Greek debt is $80bn (of which $65bn is Greek).

A writedown or haircut of Greek, Irish and Portuguese debt could cause difficulties for some eurozone banks.

And if such writedowns triggered losses on bank-to-bank lending - which it probably would - then the magnitude of potential bank losses starts to look troubling.

In this context, note that the exposure of just Germany's banks to banks in Greece, Ireland and Portugal is $80bn.

Or to put it another way, Germany has a very powerful interest in persuading Greece, Ireland and Portugal not to default - which, some would say, isn't necessarily captured in bailout terms for Ireland and Greece that are seen inside those countries as carrying punitive interest rates.

But in assessing the potential damage from the admission by Portugal's caretaker premier that the country needs an emergency loan, it is just as important to assess the vulnerability of Portugal's domestic banks - and of the European Central Bank.

As I have pointed out here before (see my 30 November post, the Perilous Condition of Portugal's Banks), Portuguese banks - financed by the European Central Bank and the Central Bank of Portugal - have in effect been funding the ballooning Portuguese government deficit.

Arguably, the European Central Bank and Central Bank of Portugal have been lending to the Portuguese state - without admitting as much - with Portugal's banks acting as agent.

Here are the statistics. From the end of December 2008, Portuguese banks' exposure to Portugal's central government rose from 4.7bn euros to 19.5bn euros.

That is a jump of 15bn euros over a couple of years, which represents around half of the Portuguese deficit in that period.

Or to put it another way, Portugal's government was only able to borrow what it needed by selling bonds because Portuguese banks were prepared to buy these bonds.

Now Portugal's banks were only able to lend to the government because they in turn massively increased what they borrowed from the European Central Bank and the Central Bank of Portugal.