European bank funding attracts scrutiny from US regulators

The Federal Reserve Bank of New York has stepped up scrutiny of European banks' ability to fund themselves. Photograph: David Karp/AP

US regulators are stepping up their scrutiny of the US arms of Europe's largest banks, amid mounting concerns that the eurozone debt crisis could spill into the American banking system.

The Federal Reserve Bank of New York, which oversees the US operations of many large European banks, has been asking for more information about their ability to fund themselves, the Wall Street Journal reported. It wants to know whether they have reliable access to the funds needed to operate on a day-to-day basis in the US, and is pushing them to turn their US businesses into self-financed organisations that are better insulated from potential problems with their parent companies.

Officials at the New York Fed are "very concerned" about European banks facing funding difficulties in the US, a senior executive at a major European bank who has attended talks with officials told the Journal.

The New York Fed has also been co-ordinating with New York's superintendent of financial services, Benjamin M Lawsky, to monitor European banks' funding positions, amid fears that those in trouble could siphon money out of their US arms.

According to Federal Reserve data, foreign banks, many of which have big trading operations in the US, have seen their funding positions there fluctuate wildly in recent months. s.