U.S. companies sat on their largest pile of cash on record during the third quarter, providing a substantial buffer against any blow that might come from Europe's debt crisis, data from the Federal Reserve showed on Thursday.

Non-financial corporate businesses held $2.12 trillion in liquid assets, such as cash, during the July-September period, up from a revised total of $2.07 trillion in the previous quarter, the data showed.

Companies have steadily increased their cash holdings since the country emerged from the 2007-2009 recession, with firms uncertain about future demand and financial stability. A worsening of Europe's debt crisis could disrupt global financial markets, potentially making it harder for companies to borrow money.

The Fed data, part of its Flow of Funds report, also showed U.S. household debt contracting at a 1.2 percent annual rate in the third quarter, while household wealth fell by $2.45 trillion.

Households mostly shed mortgage debt, which declined at a 1.8 percent annual rate. Consumer credit, a smaller part of household balance sheets, rose by 1.2 percent.

A drop in the value of financial assets dragged down household net worth to $57.35 trillion.

Households have struggled to rebuild their net worth after the country's housing bubble popped and triggered the 2007-2009 recession. At the end of 2006, household wealth was $65.17 trillion, the figures show.

(Reporting By Jason Lange; Editing by Andrea Ricci)