Jan 28 - U.S. prime money market fund (MMF) exposure to
eurozone banks decreased slightly during December 2012, with the notable
exception of French banks, according to a new Fitch Ratings report. This
represents the first time since end-June 2012 that MMF eurozone holdings
Overall, MMF allocations to Eurozone banks have increased by more than 70% since
falling to a historical low in end-June 2012 and now represent 12.9% of MMF
assets. However, Fitch notes that MMF allocations to Eurozone banks remain more
than 60% below end-May 2011.
The one exception to the December trends was French banks. Allocations to French
banks continued to increase and as of end-December 2012 represent approximately
6.5% of assets under management. This is the first time since end-August 2011
that France represents the largest single country exposure within Europe. Japan
remains the largest single-country exposure globally at 13.2% of MMF assets, a
6% increase since end-Nov. 2012.
The proportion of European and Eurozone exposure in the form of repos decreased
markedly, a reduction in secured exposure that might to some extent indicate an
easing in MMF risk aversion to the sector. Aggregate repo exposure represented
about 15% of total MMF assets at end-December, down from 20% of MMF assets at
Fitch believes it is unlikely that MMF exposures to European banks will return
to 2011 levels, given ongoing efforts by many financial institutions and banking
regulators to limit the use of short-term wholesale funding.
The full report 'U.S. Money Fund Exposure and European Banks: Eurozone Declines,
France Increases' is available at 'www.fitchratings.com.' Fitch's analysis is
based on a sample set of the top-10 largest U.S. MMFs per each observation
period and represents approximately $668 billion, or 45% of the estimated $1.49
trillion in total U.S. prime MMF assets under management.