Fed raises scrutiny of EU banks

The US Federal Reserve Bank is taking a closer look at the US units of Europe's biggest banks, concerned that Europe's debt crisis could spill into the US banking system, the Wall Street Journal reported. The Fed's New York branch — which oversees US units from many European banks — is asking more information about whether the banks have reliable access to the funds needed to operate in the United States, the newspaper said. New York Fed officials "are very concerned" about European banks facing funding difficulties in the United States, a senior executive at a major European bank who has participated in the talks told the Wall Street Journal. The Fed was not available to comment. Article continues below On Wednesday, one Eurozone bank borrowed $500 million (Dh1.83 billion) from the European Central Bank (ECB) at a rate much above those at which banks can get dollars in the open market, indicating at least some distress in that market. Funding costs It was the first time since February 23 a bank used the central bank's facility, and came as the escalation of Europe's debt crisis limits interbank lending. Dollar funding costs for Eurozone banks have trebled over the last month. Fed officials recently have held meetings with US-based executives from top European banks to discuss their funding positions, the Wall Street Journal said. Regulators are trying to guard against the possibility European banks that encounter trouble could siphon funds out of their US arms, sources told the Wall Street Journal.