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The eurozone banking system is on the edge of collapse as major lenders begin to run out of the assets they need to keep vital funding lines open.
Senior analysts and traders warned of impending bank failures as a summit intended to solve the European crisis failed to deliver a solution that eased concerns over bank funding.
The European Central Bank admitted it had held meetings about providing emergency funding to the region's struggling banks, however City figures said a "collateral crunch" was looming.
"If anyone thinks things are getting better then they simply don't understand how severe the problems are. I think a major bank could fail within weeks," said one London-based executive at a major global bank.
Many banks, including some French, Italian and Spanish lenders, have already run out of many of the acceptable forms of collateral such as US Treasuries and other liquid securities used to finance short-term loans and have been forced to resort to lending out their gold reserves to maintain access to dollar funding.
"The system is creaking. There is a large amount of stress," said Anthony Peters, a strategist at Swissinvest, pointing to soaring interbank lending rates.
... have been forced to resort to lending out their gold reserves to maintain access to dollar funding.