Nov 30 - U.S. prime money market funds (MMFs) increased their exposure to Eurozone banks,
although the fund holdings still remain well below mid-2011 levels, according to Fitch Ratings.
As of end-October, MMF holdings of Eurozone banks were 13%, a 24% increase on a
dollar basis since end-September 2012. French bank exposure also rose and
represents 5% of MMF assets, the highest level since end-October 2011.
Fitch notes that MMF Eurozone bank exposure remains approximately 63% below
end-May 2011 allocations, with French bank exposures more than 70% below current
levels. Fitch believes several factors are likely to inhibit a full return to
past allocations, including European banks' diminished desire for this form of
short-term, potentially volatile wholesale funding. Furthermore, new Basel III
liquidity rules will constrain banks' use of short-term funding.
Aggregate repo exposure rose 30% between end-September and end-October, and
represents approximately 20% of total MMF assets.
The 15 largest exposures to individual banks collectively represent 43% of total
MMF assets, with only two Eurozone institutions on the list, including Societe
Generale, which enters the top 15 for the first time since end-July 2011.
Australian, Canadian and Japanese banks continue to represent the majority of
names within the top 15.
The full report 'U.S. Money Fund Exposure and European Banks: Eurozone Rise
Continues' is available at 'www.fitchratings.com.'