ECB has no doubt Fed will continue to supply dollars abroad

FRANKFURT (Reuters) -European Central Bank supervisors are analysing the dollar exposure of euro zone banks but there is no doubt the U.S. Federal Reserve will continue to supply liquidity at times of stress, ECB vice president Luis de Guindos said on Wednesday.

U.S. President Donald Trump's recent attacks on the Fed have raised question about the U.S. central bank's independence and its long-standing commitment to ensuring that foreign banks don't run out of dollars when funding markets dry up.

De Guindos said the ECB's supervisory arm was looking into this risk but he was confident that so-called swap lines between the Fed and major central banks, including the ECB, had been beneficial for both sides and would continue.

"The agreement that we have with the Federal Reserve, I do not have any doubts that will continue being an important pillar for financial stability globally," de Guindos told a press conference as he presented the ECB's Financial Stability Review(FSR)

"These agreements, these swap lines, have been very positive for financial stability on both sides of the Atlantic."

Reuters exclusively reported last week that ECB supervisors had asked some banks to assess their need for U.S. dollars in times of stress and particularly if the Fed withdrew the swap lines.

So far, however, banks' funding markets such as repurchase agreements (repo) and foreign exchange (fx) swaps had remained calm despite trade-related turmoil in other asset classes.

"Market functioning has been orderly," the ECB said in its FSR. "Neither have there been any signs of impaired access to foreign currency funding via repo and FX swap markets, despite the volatility seen in other market segments."

(Reporting by Francesco Canepa and Balazs Koranyi; Editing by Alex Richardson, Alexandra Hudson)