Reference News, July 21 report - According to Reuters, July 18 report, three sources said that the Bank of England, the UK's central bank, has asked some financial institutions to test their resilience against potential dollar shocks. This is the latest sign that people's trust in the United States as a cornerstone of financial stability is being eroded by the Trump administration's policies.
As the main currency for global trade and capital flows, the dollar is the lifeblood of the global financial system.
However, Trump has deviated from the United States' long-standing policies on free trade and defense, forcing countries' policymakers to consider whether they can still rely on the US to provide emergency dollar supplies during financial stress.
Although the Federal Reserve has stated its desire to continue providing dollars to the financial system, Trump's policy shifts have prompted European allies to re-evaluate their reliance on Washington.
A source familiar with the matter told Reuters that after European regulatory authorities made similar requests, the Bank of England, which supervises banks in London's financial district, has asked some banks to assess their dollar funding plans and their dependence on the dollar, including short-term needs.
Another source said that in recent weeks, a UK-based global bank was required to conduct an internal stress test, simulating scenarios where the dollar foreign exchange swap market could completely dry up.
Richard Portes, professor of economics at the London School of Business and former chair of the Scientific Committee of the European Systemic Risk Board, said: "In the event of a global dollar funding crisis, the Federal Reserve may hesitate to provide swap credit due to concerns about Trump's strong reaction."
He said: "Foreign banking regulators should urgently urge their domestic banks to strictly limit their dollar exposure."
The aforementioned sources added that the Prudential Regulation Authority, responsible for regulating the Bank of England, has separately made these requests to some banks.
One of the sources said that given the dominant position of the dollar in the global financial system and the banks' reliance on the dollar, no bank would be able to withstand a major shock to the dollar supply for more than a few days.
If banks find it harder to obtain dollar loans and the cost is higher, it could hinder their ability to meet cash demands.
Ultimately, a bank that struggles to obtain dollars may be unable to meet depositors' withdrawal demands, triggering a loss of confidence and further capital outflows.
Although this situation is considered extreme and unlikely to occur, regulators and banks no longer take access to dollars for granted. (Translated by Wang Qun)
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