Letters of credit (L/Cs) issued by US banks may be exposed to risks in Europe's banking sector.

Recent concerns over exposures to European counterparties have centred on banks in France, where several US banks have reportedly increased their gross exposures this year.

L/C commitments

Citigroup's exposure to French banks increased by 40 per cent in the six months to end-June by US$15.7 billion, according to the bank's latest report.

The group now has a total of US$44 billion outstanding in its dealings in France.

Citibank also had US$64.9 billion in client commitments in France, which includes L/Cs, according to its quarterly report.

Concerns

Goldman Sachs has also reportedly increased its exposure to French banks by around 30 per cent, although it is unclear how much of this is covered by hedging and other strategies.

Concerns have risen in recent weeks over European banks' ability to maintain funding in the wake of Europe's several government debt crises.

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