NEW YORK ( TheStreet) -- UBS ( UBS) and Credit Suisse ( CS) have firmly denied rumors they accessed short-term dollar funding via the Swiss National Bank amid heightened fears about liquidity problems at Europe's financial institutions.

Under the so-called 'Term Auction Facility,' a number of central banks have a dollar-based swap arrangement in place with the Federal Reserve -- a throw-back to the funding difficulties experienced by banks at the height of the global financial and sovereign debt crises.

Last week the banking industry was beset with rumours that a Swiss bank had accessed the U.S. liquidity facility through the SNB, according to the Financial Times.

In a terse statement issued Friday, UBS said it had not made use of the Fed facility through the SNB, adding, "These rumors are completely unfounded."

Credit Suisse also issued a statement denying the rumors.

It follows news that the European Central Bank issued a $500 million loan to an un-named financial institution on Wednesday, further fuelling market speculation that Europe's banks may be in trouble.

After a massive sell-off across European banking stocks Thursday, some French and German banks stabilized somewhat early on Friday, clawing back some of their losses. Spanish, Italian and British banks continued to suffer, however, despite suggestions the significance of the $500 million loan may be overplayed. Europe's banks were accessing weekly dollar loans of up to $10 billion via the Fed's facility in May 2010 when the sovereign debt crisis was at its most intense.

By late morning in New York Spanish banking heavyweight Banco Santander was down 4.28%, Italy's Unicredit was down 2.98% whie Intesa Sanpaolo was down 3.6%. Britain's Lloyds was down 3.59%.