Eurozone Banks are Pulling Out of the U.S.
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Date: 2012-07-25
Back in December we discussed how lack of access to dollar funding will push Eurozone banks out of the US. That's not because these banks don't like US lending. It's simply due to the fact that European banks generally rely on domestic euro deposits for funding (exacerbated by increased capital requirements). To obtain dollar funding however they used to issue commercial paper and sell it to US money market funds. But US money market funds walked away from this CP last year to avoid exposure to the Eurozone. This left Eurozone banks with no access to dollars except via the Fed Liquidity Swap (or converting euros into dollars and hedging the position via currency basis swap, which became extremely expensive). Here are a couple of posts on the topic: Post 1, Post 2. This unwind of US assets is in fact now taking place and US banks are the beneficiaries. FT: - France and Germany, led by BNP Paribas and Deutsche Bank, still have some of the biggest foreign operations in the US. But French financial groups including BNP, Crédit Agricole and Société Générale have announced plans to shrink their balance sheets. |