The recently completed summit of EU leaders came up with a solution of sorts to deal with the sovereign debt crisis.

But what it didn't address was the growing crisis over credit access for european banks. The Telegraph:

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.

[...]

Alastair Ryan, a banks analyst at UBS, said there would be "no Lehman moment" - or single catastrophic event - for the European banking sytem, but added that without a full backstop of bank liabilities by governments the system would "struggle to finance itself in the next year in a durable way".

"The system at the moment hasn't got funding of a duration that allows it to function, so it's failing," he said.

One analyst said 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." Moody's downgraded the three largest French banks just this week for "liquidity and funding constraints." This would seem to indicate that the central bank has its work cut out for it if it is going to keep the european banking system up and running.