As Banking Crisis Spreads, Western Central Banks Coordinate Action to Enhance the Provision of U.S. Dollar Liquidity
Posted on 03/20/2023
On 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 announced a coordinated action to enhance the provision of liquidity via the standing U.S. dollar liquidity swap line arrangements.
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. These daily operations will commence on Monday, March 20, 2023, and will continue at least through the end of April 2023.
The network of swap lines among these central banks is a set of available standing facilities and serve 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.
The statements from various central banks comes hours after Swiss authorities orchestrated an emergency takeover of Credit Suisse Group AG by UBS Group AG. Credit Suisse is one of the 30 most important banks in the global financial system.
Keywords: Federal Reserve System.