The exceptional measure comes just following the takeover of Credit Suisse by UBS.
By Le Figaro with AFP
Published update
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Central banks in the United States, Switzerland and other countries on Sunday announced coordinated action to improve access to liquidity to reassure markets amid a crisis of confidence in the banking system. The exceptional measure comes just following the takeover of the Credit Suisse by UBSan operation orchestrated by the Swiss government to restore confidence in the financial system.
The institutions have decided to strengthen the “swap lines“, a device which facilitates the access of foreign central banks to dollars. Central banks will thus increase the frequency of operations in dollars: “hitherto weekly, these operations will now be daily and will begin on Monday, March 20, 2023. They will continue at this rate at least until the end of April“, indicates the press release.
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The line network of swap serves as “liquidity safety net to ease tensions in international funding markets and thus help to mitigate the effects of these tensions on the supply of loans to households and businesses“, recall the institutions. The markets, in turmoil since the flash bankruptcy of the Silicon Valley Bank, fear running out of cash as interest rates have risen to fight inflation.
In 2020 the Fed had put in place and extended similar agreements in the face of the advance of the Covid-19 pandemic, and these had already been extended. The agreement was signed by the Bank of England, the Bank of Canada, the European Central Bank (ECB), the Bank of Japan, the Swiss National Bank (SNB) and the Federal Reserve of the United States.