LONDON, July 19 (V7N) — The Bank of England has instructed several major lenders to assess their resilience to potential disruptions in U.S. dollar funding, in a move that underscores growing global concerns over the reliability of the dollar system under the Trump administration.
 
Sources familiar with the matter said that the BoE, through its supervisory wing, the Prudential Regulation Authority (PRA), has privately asked some banks to run internal stress tests. These include scenarios where access to U.S. dollar liquidity — including critical swap lines — could be sharply reduced or even dry up entirely.
 
This directive follows similar warnings from European regulators and highlights mounting unease over U.S. monetary dependability amid a shift in Washington’s geopolitical posture. President Donald Trump’s departure from traditional U.S. policies on global trade, defense cooperation, and multilateral coordination has unsettled policymakers worldwide. Many now question whether the Federal Reserve can or will maintain its historic role as the dollar liquidity provider of last resort.
 
"The Fed might hesitate to offer swaps for fear of strong Trump reaction — its priority is monetary policy independence," said Richard Portes, professor of economics at London Business School and former Chair of the European Systemic Risk Board’s Advisory Scientific Committee. “Foreign bank supervisors should urgently push their banks to limit dollar exposures severely.”
 
One British-based global lender confirmed it had recently been asked to model scenarios where dollar swap markets freeze completely. Another source noted that the requests are confidential and tailored individually to select banks with significant cross-border operations.
 
The Bank of England declined to comment on the report. Major international banks operating out of the UK — including Barclays, HSBC, and Standard Chartered — also declined to provide statements.
 
Dollar dominance remains central to global financial stability. The U.S. currency underpins the vast majority of cross-border transactions, bond settlements, and trade flows. However, the risk of sudden disruptions — whether due to geopolitical rifts or executive decisions — has introduced a new dimension of systemic vulnerability.
 
A White House spokesperson defended the administration’s economic track record, stating: “Stock and bond rallies as well as trillions in historic investment commitments since Election Day are all indicative of the fact that markets and investors have resoundingly reaffirmed their confidence in the U.S. dollar and U.S. economy under President Trump.”
 
But behind the scenes, some regulators are less reassured. If access to U.S. dollar borrowing were to tighten rapidly, even the largest international banks might struggle to meet short-term obligations. The consequences could include cash flow disruptions, depositor panic, or broader systemic risk.
 
Although such a scenario remains unlikely, it is no longer being dismissed as impossible. For central banks and global financial regulators, the question is not whether to prepare — but how quickly those preparations can be implemented.
 
News Source: Reuters
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