The European banking system was on the verge of a complete collapse towards the end of last year, a senior policymaker has admitted.
Benoit Coeure, an executive at the European Central Bank (ECB), believes the continent's financial system was in dire straits as the eurozone debt crisis and the pressure of having to comply with the incoming Basel III regulations weighed on the performance of lenders.
During an interview with the BBC, Mr Coeure explained that conditions were "very dangerous" in the autumn of 2011.
"European banks were facing severe difficulties to fund themselves, to access finance, and we were very close to having a collapse in the banking system in the euro area," he noted.
Mr Coeure stated the plausible prospect of the entire continental economy faltering and experiencing deflation was the reason the ECB had to intervene with its three-year loans at one per cent interest refinancing scheme.
By Gary Cooper