There has been a funding gap faced by the European bank and the gap is as high as much as $4 trillion. The amount of funding gap of $4 trillion has been estimated by Bank of International settlements(BIS) reports. According to the estimation by BIS Europe banks may face about $3.96 trillion dollar funding gap. Even if the European Banks borrows(assuming)from many of the non banks like mutual funds it is just short period. The non banks borrowings will support the finance dollar dominated assets for a long term and then the gap will be $282 billion.
The fund gap estimated is ranged from $339 billion to about $3.85 trillion at the end of the year 2009. The funding gaps of US dollar and along with the European banks feels that funding needs to be size able. Though the funding has come down substantially when compared to the year 2007-2008 which it peaked more. There has been some signs regarding the US dollar funding pressures which is resurfaced again by the quarter of the year. The European banks will be paying the cost to convert the euro into dollar in a period of three months.
But since December 2008the currency payments will be raised during the month to its highest while the currency swap rates is less. In coordination with European Central Bank and Federal Reserve Bank the three mo nth dollar loans in the euro area banks will be extended. The local money market and deposits will be used by the European Banks and converted through swaps to dollars and loans will be taken from non-banks.
