The Bank of England has launched a detailed internal review into how exposed major UK lenders are to dollar-denominated assets, amid rising concerns about potential market volatility linked to a possible return of Donald Trump to the U.S. presidency. According to senior financial sources, regulators are conducting stress tests and scenario modeling to evaluate the risks posed by geopolitical instability and abrupt policy shifts should Trump retake the White House.
The inquiry comes amid a broader assessment of international financial system vulnerabilities. UK regulators are particularly focused on the balance sheets of banks that are heavily reliant on U.S. dollar funding or have significant trading positions in U.S. financial instruments. Given the dollar’s global reserve status, any destabilization in U.S. governance or trade policy could reverberate through the global financial system.
Bank executives have been asked to provide updated contingency plans for a range of Trump-related scenarios, including tariff escalations, withdrawal from trade agreements, and abrupt changes to Federal Reserve policies. While most UK banks maintain robust capital buffers, concerns remain about liquidity shocks, asset repricing, and foreign exchange volatility.
The Bank of England’s move reflects a growing trend among central banks to integrate political risk into their macroprudential assessments. Financial authorities in Europe and Asia are reportedly engaged in similar exercises, anticipating a turbulent global environment ahead of the 2024 U.S. election cycle. The Bank has emphasized that the review is precautionary and does not indicate any immediate risk of financial instability.
Market participants are closely watching how potential U.S. policy shifts could affect everything from interest rates to dollar flows. With inflation and rate divergence already complicating global investment strategies, the added uncertainty from potential Trump-era policies has made financial planning more complex. Analysts note that even the perception of political unpredictability can have measurable effects on investor sentiment and capital allocation.
This review represents an important step in future-proofing the UK’s financial system against external political shocks. While central banks cannot predict electoral outcomes, preparing for a range of scenarios helps reduce systemic risk. A proactive approach to geopolitical uncertainty is essential for financial resilience in an increasingly interconnected world.