Britain's banks slashed $50bn (£32bn) from their exposure to France, Italy and Spain during the summer as financial institutions ran scared from Europe's debt crisis, according to the Bank for International Settlements (BIS).
The Basel-based BIS, "the central banker's bank", revealed that UK banks' total exposure to the three European strugglers had fallen to $430.4bn at the end of September, against $479.9bn at the end of June.
British banks' stocks of French, Spanish and Italian sovereign bonds were dumped as markets turned on vulnerable European nations.
This is particularly uncomfortable news for France's President Nicolas Sarkozy, pictured, who is likely to seek re-election this year.
The BIS figures revealed that UK bank holdings of French, Italian and Spanish sovereign debt dived by 32 per cent to $55.5bn over the quarter, with holdings of Italian bonds suffering the biggest sell-off.
Instead, banks sought out safety in German bunds, boosting their holdings by more than $40bn during the period.
The European Central Bank's December move to pump nearly €500bn into ailing financial institutions for three years eased the immediate threat of a credit crunch. However, France was stripped of its triple-A credit rating this month, while Italy's debt-laden economy is heading into recession and Spanish unemployment broke throughthe five million barrier.