The central banks of the United States, Switzerland and other countries on Sunday announced a concerted move to provide more liquidity to reassure markets in the midst of a crisis of confidence in the banking system.
The extraordinary measure comes shortly following the acquisition of its rival, Credit Suisse, by Swiss bank UBS, in a process coordinated by the Swiss government aimed at restoring confidence in the banking system.
What are the measures taken by the major central banks?
- Institutions decided to promote “swap lines,” mechanisms that give foreign central banks easier access to dollars.
- Central banks will thus increase the pace of operations in dollars.
- These operations, which have been conducted so far on a weekly basis, will become daily as of Monday, March 20, and will remain at this rate until at least the end of April.
- The “Swap Lines” network serves as a “liquidity safety net to calm tensions in global financial markets and thus contribute to mitigating the effects of these tensions on the supply of loans to households and companies.”
- The markets are experiencing major tensions since the bankruptcy of the “Silicon Valley Bank”, amid fears of a lack of liquidity following raising interest rates as part of efforts to combat inflation.
- The Federal Reserve (the US central bank) had concluded and extended similar agreements in 2020 in the face of the repercussions of the Covid-19 pandemic.
- The agreement was concluded between the central banks of Britain and Canada, the European Central Bank, Japan, Switzerland and the Federal Reserve.
