Money-market mutual funds reduced lending to European banks further last month, with the biggest U.S. funds cutting their holdings to the lowest in at least five years, as the region's sovereign debt crisis worsened.

The 10 biggest U.S. funds eligible to purchase corporate debt, with a combined $676 billion, reduced European bank assets to 42 percent of holdings, the lowest level since at least 2006, Fitch Ratings said today in a report. European funds also are cutting holdings of Spanish and Italian assets and shortening the maturities of the investments they keep, Fitch said in a separate report this week.

The sovereign-debt crisis has raised concern that money-market funds may suffer losses if banks fail to meet obligations as a result of defaults. Money funds' withdrawal has made it difficult for some European banks to get longer-term funding and forced the European Central Bank to step in.