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Euro Area Banks Cut Lending At End of 2011

Euro Area Banks Cut Lending At End of 2011

A newly released quarterly survey of commercial banks conducted by the European Central Bank found that financial institutions in the euro area decreased lending significantly at the end of last year.

 

The survey, which included data from the final three months of 2011, suggested a number of banks were becoming more restrictive in terms of lending, largely due to difficulty raising money and the need to reduce risk.

According to The New York Times, the survey was the latest indication of the struggles the banking system has been forced to cope with as a result of the sovereign debt crisis. The Times reported the survey may have also provided validation for the European Central Bank's decision to give large emergency loans to some banks in order to prevent a complete lending drought.

"A credit crunch would tip the euro zone back into a severe recession," Marie Diron, an economist who advises the consulting firm Ernst & Young, said in a statement, according to the Times.

The results of the survey come as a number of European banks have also decided to slash finance jobs, including Credit Suisse, Barclays and Royal Bank of Scotland, according to multiple reports.

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