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American money market funds
have been closing the spigot
of money they lend to European banks,
forcing them to tighten lending
standards and, in some cases,
even withdraw financing from
longtime customers. To make matters worse,
European institutions are simultaneously
under pressure from their regulators
to hold more capital for each
dollar they lend, prompting many
banks to reduce their portfolio of loans.
Analysts say Europe’s banks
could shed up to 3 trillion euros of loans over the next few years, equal to about 10 percent of their total assets.