Some European central banks and supervision authorities are wondering if they can still count on the US Federal Reserve to provide dollar financing in times of market stress, six people said familiar with the subject, launching some questions about what has been an foundation for financial stability.
The sources told Reuters that they consider it highly unlikely that the Fed does not honor their financing safeguards – and the US Central Bank itself gave no signs that suggested it.
But European authorities have maintained informal discussions about this possibility – that Reuters is reporting for the first time – because their confidence in the United States government has been shaken by some of the Trump government policies.
President Donald Trump has broken sharply with US longtime policy in various areas, such as seeming to endorse Russia’s position on Ukraine, raising US commitment questions to European security, and imposing tariffs on their allies.
In some European forums, in which participants assess the possible risks to the financial system, these authorities discussed scenarios in which the US government could press the Fed to suspend safeguards of the dollar, two of the sources said.
Some authorities are studying the possibility of finding alternatives to the US Central Bank, according to both sources. In times of stress in the market, the Fed provided the European Central Bank and other important partners access to dollar financing.
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The conclusion of these discussions: There is no good replacement for the Fed, said the six sources, which include senior authorities of the ECB and the European Union’s banking supervision with firsthand knowledge of conversations.
All sources requested anonymity to talk about private deliberations.
The ECB and Fed declined to comment for this report. The White House did not respond to a request for comment.
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Separately, five euro -zone central bank officials said informal conversations – held outside the regular policy formulators – were not motivated by any sign of the Fed or the leadership of the ECB.
