London (Reuters) – Supervisors of the European Central Bank (ECB) urged certain commercial banks in the region to assess their needs in US dollars in the event of a crisis while the institution develops scenarios in which it could not count on the American Federal Reserve (FED) with Donald Trump, three sources in Reuters said.

While 23% of the funding of the banks in the euro zone are denominated in foreign foreign currency, the US dollar makes the largest contribution with 17%, according to a study by the ECB published in November 2024. A source of vulnerability, especially when short -term financing markets are likely to close suddenly, for example during a crisis.

In the past, European central banks have borrowed dollars from the Fed, the source of the currency, to fill the deficit, the American central bank with loan facilities with the ECB and other large counterparts to overcome the shortages of the world reserve currency and prevent financial tensions from repercussions in the United States.

If the FED has never suggested weakening these support measures, the questioning by President Donald Trump of trade and defense agreements concluded for a long time with European allies arousing distrust could change the situation, two sources said.

The ECB supervisory authorities therefore urgently ask European banks to assess the gaps in their balance sheet, for example when they have lent dollars to clients and financed other assets labeled in dollars, but they do not have sufficient or reliable funding in this currency to honor their commitments, said one of these sources.

Still according to this source, the ECB is even putting pressure on certain banks in the euro zone so that they reduce these differences and, in some cases, their request to consider modifying some of their activities in order to be less exposed to funding in dollars.

The ECB, the Fed and the White House do not comment in a context where Donald Trump’s criticisms against the President of the Fed, Jerome Powell, worry about the maintenance of the Central Bank independence.

Reuters had also revealed in March that some central bank officials in Europe were concerned about the reliability of the Fed under the chairmanship of Donald Trump.

Claudia Buch, president of the prudential supervisory board, said during a parliamentary hearing in March that the ECB was monitoring “very closely” liquidity in the banking system, warning against the risks of liquidity linked to geopolitical shocks.

Another senior executive from a European bank regulated by the ECB has indicated that its bank has modeled in recent weeks, and for the first time, a “delicate scenario” in which the Fed Swap lines would not be available, with the consequence of a higher cost for new dollar activities.

(Written by Stefania Spezzati, Jesús Aguado, Lawrence White and Elisa Martinuzzi, with Francesco Canepa and Tom Sims in Frankfurt; Bertrand de Meyer, edited by Kate Entringer)

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