In related fashion, the empirical work on the composition of reserves identifies both trade and financial linkages as significant in explaining currency shares: all else equal, a country that trades a lot with the euro and issues a lot of euro-denominated debt will hold more euro reserves, compared to a country that is more closely linked to the US and issues a lot of dollar liabilities.
We have seen during this crisis that confidence is not always present. Liquidity waxes and wanes, and with it, so do the prices of securities. In recent months, as we have seen a fundamental repricing of virtually every financial asset across the world, liquidity in many securities has fallen dramatically. Banks have relationships with their customers.