FRANKFURT, Jan 28 (Reuters) - Germany's financial regulator BaFin said there was a risk that markets could question the role of the U.S. dollar as the global reserve currency. BaFin made the statement
BaFin Warns of Potential Challenges to the Dollar's Dominance
Risks to the U.S. Dollar's Role
By Tom Sims
FRANKFURT, Jan 28 (Reuters) - Germany's financial regulator BaFin said on Wednesday there was a risk that markets could question the role of the U.S. dollar - currently hovering near a four-year low - as the global reserve currency.
The warning comes a day after U.S. President Donald Trump said the value of the dollar was "great" when asked if he thought the currency had declined too much. His comments added to the pressure on the greenback, which hit a four-year low before edging back up.
Market Concerns and Price Corrections
Mark Branson, president of BaFin, outlining key risks it had identified for 2026, said generally the potential for sudden price corrections in financial markets was high.
Impact on German Banks
"There also remains the risk that markets will question the role of the U.S. dollar as the global reserve currency," Branson said.
BaFin said U.S. dollar risks for German banks were "manageable".
European banks are dependent on short-term refinancing in dollars in order to meet their liabilities.
Refinancing and Liquidity Issues
"Bottlenecks or abrupt increases in costs, such as those that occur in times of stress...can trigger liquidity bottlenecks," BaFin said.
Branson said regulators were particularly interested in looking at the refinancing profile of larger banks that are most exposed to the dollar.
(Reporting by Tom Sims in Frankfurt, editing by Ludwig Burger, Thomas Seythal and Hugh Lawson)
