OK, but "chunky" is still much less than the notional value, right? (I mean, if one currency suffered runaway inflation, it could approach 100%, but that should be rare...)
It's not a notional principal for a fx swap, it's an actual principal that you swap. If your counterpart defaults, you're still liable for what you owe (usually multiple millions) but you won't receive the other side.
But in a sense, only the cost of capital is at risk, not the capital borrowed. The 80T number is capital borrowed. It’s definitely worthy of skepticism.
It’s definitely a liquidity risk given the short term and principal swaps requirements, hence mostly a central bank issue as a backstop. But potential losses in economic terms seem smaller.
