European banks slow down lending in ominous omen

European banks have begun lending less to Hong Kong in December, fueling fears the Eurozone contagion could be worsening.

Loans from European banks to clients in Hong Kong fell 6% in December from November, but it is still too early to say if euro zone lenders are withdrawing from Asia, the Hong Kong Monetary Authority (HKMA) said.

"Overall, European banks' operations in Hong Kong have remained stable," said HKMA Deputy Chief Executive Arthur Yuen.

"The December numbers are still a single point, and whether it's a seasonal issue or the beginning of a trend is still not clear."

For the whole of 2011, however, European loans to Hong Kong rose 5%, Yuen noted.

Under pressure from a spiralling debt crisis at home, many European banks have begun offloading more of the loans they hold in Asia, making it tougher for small and medium-sized companies to borrow.

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