Federal and state regulators, signaling their growing worry that Europe's debt crisis could spill into the U.S. banking system, are intensifying their scrutiny of the U.S. arms of Europe's biggest banks, according to the Wall St Journal.
The Federal Reserve Bank of New York, which oversees the U.S. operations of many large European banks, recently has been holding extensive meetings with the lenders to gauge their vulnerability to escalating financial pressures. The Fed is demanding more information from the banks about whether they have reliable access to the funds needed to operate on a day-to-day basis in the U.S. and, in some cases, pushing the banks to overhaul their U.S. structures, the people familiar with the matter say.
Officials at the New York Fed "are very concerned" about European banks facing funding difficulties in the U.S., said a senior exec at a major European bank who has participated in the talks. Regulators are seeking to avoid a repeat of the 2008 financial crisis, when the global financial system began to seize up. This time the worry is that the euro-zone debt crisis could eventually hinder the ability of European banks to fund loans and meet other financial obligations in the U.S. While signs of stress are bubbling up, the problems aren't yet approaching the severity of past crises….
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