LONDON: Countries that see themselves as US allies are now considering whether President Donald Trump’s administration could one day disrupt their payments systems to exert diplomatic pressure, a former top Bank of England official has said.
Jon Cunliffe, the BoE’s deputy governor for financial stability from 2014 to 2024, said Western countries relied heavily on US-headquartered Visa and Mastercard for day-to-day domestic transactions and found it hard to avoid US banks when making foreign payments.
“What you’ve seen now with Greenland and Canada and other areas is that this particular administration appears to be as likely to use all the levers it has against jurisdictions that you would traditionally think of as its allies as its opponents,” he told an event hosted by Britain’s National Institute of Economic and Social Research late on Tuesday.
“I’ve heard it from people in the payments network: ‘Do I want to use the US system because it might now be weaponized against me?’” Cunliffe added.
Comments come as Trump begins state visit to Britain
His comments came as Trump began an unprecedented second state visit to Britain after forging a cordial relationship with Prime Minister Keir Starmer.
Cunliffe drew a parallel with some Western countries’ new-found reluctance to buy US fighter jets, possibly due to fears that they could be remotely disabled.
“The question of the ‘kill switch’ which people worry about for F-35s... the issue of the ‘kill switch’ exists in terms of payments.”
Visa and Mastercard suspended operations in Russia in March 2022 after Russia’s full-scale invasion of Ukraine.
BoE Governor Andrew Bailey told parliament this month he was “very concerned” about Trump’s pressure on the Federal Reserve’s independence.
And at a European Central Bank event on September 3, another former BoE official, Adam Posen, who is now president of the Peterson Institute for International Economics, said it should not be taken for granted that a politicized Fed would lend dollars to foreign central banks in a crisis, as it has done a few times since the 2007-2008 financial meltdown.
Both the BoE and the ECB have already asked lenders to assess their need for US dollars in times of stress, as they game out scenarios in which they cannot rely on tapping the Fed, according to people with knowledge of the discussions.
Asked about this specific risk, Cunliffe said he believed US policymakers would realize it was in their national interest to preserve dollar swap lines to prevent financial turmoil spilling over into US markets.
But he said he would be more concerned if there were an abrupt loss of global confidence in the US dollar at the same time.
“If people don’t want dollars, how do you put the fire out? That looks much more like an emerging market currency crisis.” (Reporting by David Milliken Editing by Kevin Liffey and Gareth Jones)
