ALBAWABA - The U.S. Federal Reserve and several major central banks agreed to boost the flow of U.S. dollars globally to keep credit accessible to businesses and households.
The agreement, which goes into effect Monday, was announced late Sunday in a joint statement released by the European Central Bank (ECB).
Press release: Coordinated central bank action to enhance the provision of US dollar liquidity https://t.co/eOjI4tBRPz pic.twitter.com/Zvz0yJg1Mr— European Central Bank (@ecb) March 19, 2023
"The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing a coordinated action to enhance the provision of liquidity via the standing U.S. dollar liquidity swap line arrangements," the central banks said in a joint statement.
⚠️BREAKING:— Investing.com (@Investingcom) March 19, 2023
*FEDERAL RESERVE: THE FED AND THE CENTRAL BANKS OF THE UK, CANADA, JAPAN, THE ECB, AND SWITZERLAND ANNOUNCE A COORDINATED ACTION TO IMPROVE LIQUIDITY PROVISION THROUGH THE STANDING US DOLLAR LIQUIDITY SWAP LINES pic.twitter.com/3tSBYCSBLu
The statement came hours after Swiss authorities arranged an emergency takeover of Credit Suisse by UBS in a historic deal. Credit Suisse is one of the 30 most important global banks. It almost collapsed last week after investor and customer confidence eroded.
UBS will buy Credit Suisse for 3 billion Swiss francs. Is this a bailout? @ManusCranny reports from Zurich https://t.co/9PBFYo7auc pic.twitter.com/QkH8UPZRzX— Bloomberg (@business) March 20, 2023
That followed the collapse of two top banks in the United States, namely Silicon Valley and Signature, sending jitters across the global market and threatening to make it harder for people to borrow money, CNN reported U.S. Treasury Secretary Janet Yellen.
The ECB statement said to "improve the swap lines’ effectiveness in providing U.S. dollar funding, the central banks currently offering U.S. dollar operations have agreed to increase the frequency of 7-day maturity operations from weekly to daily."
It said the daily operations will begin Monday and will continue through the end of April.
The statement said the network of swap lines "is a set of available standing facilities and serves as an important liquidity backstop to ease strains in global funding markets, thereby helping to mitigate the effects of such strains on the supply of credit to households and businesses."
CNN said swap lines are "agreements between two central banks to exchange currencies" and that "they allow a central bank to obtain foreign currency from the central bank that issues it, and distribute it to commercial banks in their country."
Central banks' USD swap lines have been used as backstops in previous episodes of financial stress. Not clear if banks will use them is size for now.— Frederik Ducrozet (@fwred) March 20, 2023
??Results of the ECB's first operation will be published at 10:50 CET today. Last take-up was only USD470mn. https://t.co/BSijSX6PB0 pic.twitter.com/WXWy50a2lI
"The swap line between U.S. Federal Reserve and the ECB, for example, enables the ECB to receive U.S. dollars in exchange for an equivalent amount of euros," CNN reported. It said the ECB can then distribute the dollars to commercial banks in the 20 countries that use the euro.