26 November 2025 – Frankfurt: The European Central Bank (ECB) has warned that euro zone lenders with significant U.S. dollar operations should strengthen their liquidity and capital buffers to withstand potential dollar-market stress, citing increased volatility following President Donald Trump’s actions.

In its Financial Stability Review (FSR) released Wednesday, the ECB said banks with large dollar businesses—including BNP Paribas, Deutsche Bank, Credit Agricole, Groupe BPCE, ING, Banco Santander, and Societe Generale—may need extra capital to absorb higher currency volatility and counterparty credit risk.

The report highlights that these lenders often borrow in U.S. money markets or provide FX swaps to hedge funds, insurers, and corporates. While such operations are typically offset through swaps with other global lenders, the ECB cautioned that “rolling over these positions can become challenging during periods of stress in FX swap markets.”

ECB data shows euro zone banks held €681 billion ($788.53 billion) in dollar securities and lent €712 billion in U.S. dollars at the end of last year. The central bank urged banks to hold liquid dollar assets to act as stabilising intermediaries in case of outflows or market turbulence.

While the FSR does not impose binding requirements, it reflects policymakers’ concerns over dollar liquidity. ECB Vice President Luis de Guindos played down extreme risk scenarios, emphasizing that bilateral swap lines with the Federal Reserve remain a crucial backstop for maintaining financial stability across the Atlantic.