However, given the current weakness in stock markets, it is not easy for financial institutions to increase capital on their own. As a result, concerns about counterparty risk have increased, causing some financial institutions to reduce interbank market trading activities.
In addition, uncollateralized interbank trading, particularly of term instruments, has been declining, leading to an increase in funding costs for European financial institutions, mainly for longer-term and U.S. dollardenominated funds.