Impending Crunch of Eurozone banking system

The problem of Euro Debt Crisis has become so severe that a major bank in the Eurozone could fail within weeks. Major banks have already run out of assets to keep the funding going. The European Central bank had been planning on how to provide emergency funding to help the struggling banks survive. But the Collateral Crunch is imminent because the system at the moment hasn't got funding of a duration that allows it to function.

The fear is the European authorities do not have the financial firepower to deal with the banks' problems. Analysts at BarCap say that even if the European rescue funds were able to raise €1 trillion of funding this would only meet the needs of the Italian and Spanish government and banks.

The European banking sector's problems are being exacerbated by a wave of asset sales as lenders look to dramatically shrink their balance sheets. UBS estimates eurozone banks could sell off between €3.7 trillion and €4.5 trillion of assets in the next three years.