Not since before the global financial crisis have Europe’s banks been able to obtain dollars as cheaply as they can now, a development that may puncture the euro’s surprising strength.
The cost of swapping euro funding streams for those in dollars to service foreign loans fell this year to the lowest since January 2008, data compiled by Bloomberg show. The cross-currency basis swap has shrunk from a three-year high reached in 2011 as Europe’s banks focused on shrinking their balance sheets instead of expanding abroad.
Europe’s 23 biggest listed banks cut their assets by 11 percent to 20.9 billion euros ($29 billion) at the end of the third quarter, from 23.4 billion euros a year earlier, data compiled by Bloomberg Industries show. The figure includes lenders from countries that don’t use the euro.
Euro-area bank claims on foreigners, including securities and loans, have declined about 10 percent since the end of 2011, according to an analysis of ECB data by Barclays.