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Investing.com -- The Bank of England has requested some lenders to test their ability to withstand potential U.S. dollar shocks, according to Reuters, citing three sources familiar with the matter.
This move represents the latest indication that Trump administration policies are undermining confidence in the U.S. as a foundation of financial stability. The U.S. dollar serves as the primary currency for global trade and capital flows, functioning as the essential component of global finance.
The Bank of England, which supervises banks in London’s financial center, has asked certain lenders to evaluate their dollar funding plans and their dependence on the U.S. currency, including for short-term needs, one source said.
In one case, a global bank based in Britain was recently instructed to conduct internal stress tests that included scenarios where the U.S.-dollar swap market might completely freeze, another source reported. The Bank’s supervisory division, the Prudential (LON:PRU) Regulation Authority, made these requests to individual banks.
According to one source, no bank could withstand such a disruption for more than a few days, given the dollar’s dominant position in the global financial system and banks’ reliance on it.
Trump’s criticism of Federal Reserve Chair Jerome Powell has reportedly added to concerns about the dollar and the Fed.
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