Federated writes "European banks are in better shape even if their economies aren't". The recent commentary by Debbie Cunningham and Bill Jamison says, "While European economies continue to struggle to break free from the economic doldrums that have plagued the continent, European banks have regained some of their financial footing over the past year. Part of the reason is that the banks have improved liquidity profiles through the European Central Bank's (ECB) extensive Long Term Refinancing Operation (LTRO) program, consisting of low-cost loans designed to free up the banks to make more loans to consumers and businesses. The ECB has been providing liquidity to the banks as a way to bridge the confidence gap in euro-zone economies. After a series of shorter-term operations that did not quite satisfy markets, the ECB stepped up and produced a three-year LTRO in December 2011, with 523 banks borrowing 489 billion euro, and a second three-year auction in February, during which 800 banks borrowed 530 billion euro. The intervention was viewed as positive by markets as the banks were able to prefund their 2012 maturing debt. What the banks did not do, however, was lend the funds out to businesses, so the intervention has not had a chance to move into the economy and spur growth, as had been expected.... A handful of money market funds chose to get out of European banks altogether during 2011, and a greater number got out of the French banks or cut back drastically. Federated, however, continues to see value in the use of select European senior bank debt. Cunningham noted that Federated money market funds invest primarily in the highest level of senior bank debt issued by institutions with operations that reach around the world."

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