EU Banks Increase Their Dependence on American Dollars

European banks have increased their dependence on United States dollars, according to a report issued Monday (Nov. 3) by the European Banking Authority.

These banks’ funding in dollars came to 13.1% of their total funding in December 2024, compared to 12.4% at the same point in 2023, the report said.

Banks’ total exposure to assets denominated in dollars also rose to 23% from 19.3%, per the report, which said banks’ subsidiaries are “increasing their reliance on U.S. dollar funding at a faster pace compared to the parent entity.”

In the report, the EBA warned about “a rather meaningful currency mismatch” in European banks’ balance sheets.

This is something European regulators have asked banks to track, Reuters reported Monday. Banks around the world have substantial dollar exposure in their balance sheets, placing them at risk of funding shocks.

Dollar funding fears have risen this year with President Donald Trump instituting new tariffs and placing pressure on the Federal Reserve, the Reuters report said. This has caused some European regulators to wonder if they can still depend on the Fed to provide dollar funding during periods of market stress.

In related news, a group of Europe’s banks is teaming to develop a euro-denominated stablecoin to combat the U.S. dollar’s domination of that space.

The new token is aimed at becoming “a trusted European payment standard in the digital ecosystem,” per a news release from Denmark’s Danske Bank, which is joined in the partnership by ING, Banca Sella, KBC, DekaBank, UniCredit, SEB, CaixaBank and Raiffeisen Bank International.

“The stablecoin will provide near-instant, low-cost payments and settlements,” the release said. “It will enable 24/7 access to efficient cross-border payments, programmable payments, and improvements in supply chain management and digital asset settlements, which can vary from securities to cryptocurrencies.”

The stablecoin will be regulated by the European Union’s Markets in Crypto-Assets regulation (MiCA), and is expected to be first issued in the latter half of 2026.

The banks said their goal is to develop a European alternative to what they called a “U.S.-dominated” stablecoin market, while also “contributing to Europe’s strategic autonomy in payments.” Individual banks will be able to offer value-added services, like a stablecoin wallet and custody.