The US Federal Reserve said it has joined the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank in a coordinated effort to expand liquidity provision through permanent US dollar swap lines. In this respect reported Reuters cites the US financial regulator’s statement.
“To increase the effectiveness of swap lines in providing USD funding, central banks that currently offer USD transactions have agreed to increase the frequency of seven-day maturities from weekly to daily,” the Fed said in a statement.
The daily clearing lines between the Fed and other global central banks will remain in effect until the end of April.
The material says other financial regulators have made similar statements.
The increase in transaction frequency follows an agreement brokered by Swiss authorities for the acquisition of Swiss bank Credit Suisse by UBS. The deal was made to prevent the collapse of the latter. This marks the “depth of concern” by central banks about the recent turmoil in the financial system on both sides of the Atlantic and follows the material.
A swap line is an agreement between two central banks of different countries to exchange currencies at fixed rates. For example, the Fed takes dollars for itself and gives dollars to the ECB. At the same time, both Central Banks issue the national currency and exchange it immediately.