Europe's spreading debt crisis has cast a foreboding shadow on the U.S. banking system, which worries Federal regulators.  Their concern is that economic pressures might lead European banks to pull out funds from, or otherwise cut the support of, their U.S. operations - which, in turn, could seize the U.S. lending market.

Regulators, therefore, have increased their scrutiny of U.S. affiliates of Europe's big banks and, in particular, the strength of their capital bases.  The New York Federal Reserve has been holding extensive meetings with European lenders, gauging their vulnerability to increasing financial pressures.  The Fed is demanding information about whether these banks have reliable access to the funds needed for U.S. operations. In some cases, the Fed's pushing banks to change their U.S. structure.  Regulators also are pushing for the European banks to make their U.S. operations self-reliant, or self-financed. 

One silver lining in this dark cloud:  the stress signals don't appear to be as severe as in past crises.   [WS Journal, 8/18/11]