2023-04-25 12:26:21
Banks raised the pace of dollar bids in the wake of the collapse of the “Silicon Valley” bank
The Federal Reserve and its global central bank counterparts will return to fewer auctions to fund US dollar liquidity following financial market jitters eased following the failure of US banks.
The joint announcement issued today, Tuesday, shifts the pace of providing emergency liquidity on a weekly basis instead of the daily offers that were submitted approximately 5 weeks ago, with the reduction of bids starting from the beginning of May.
The decision effectively amounts to an official downgrade of the threat level to global financial stability to a status closer to relative normal. This draws a line in a tense moment that briefly inspired neurotic similarities to the 2008 global financial crisis, according to Bloomberg, and Al Arabiya.net viewed it.
Central banks unveiled the day-to-day operations of the dollar just days following a catastrophic series of collapses involving the Silicon Valley Bank and two other related failures in the United States. The pressure also extended to Switzerland, where the UBS group was forced to take over rival Credit Suisse, in effect marking the first collapse of a globally comprehensive financial institution since the turmoil of 2008.
“In light of improvements in US dollar financing conditions and lower demand in recent US dollar liquidity provision operations, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank, in consultation with the Federal Reserve, have jointly decided to shift the pace of their long-term operations,” the statement said. 7 days from daily to once a week.
The statement notes that the reinvigoration of such joint measures that were first used during the global financial crisis and deployed during the pandemic also showed how the financial stability infrastructure of the central banking community and cooperation remains strong. A return to the Fed and its peers to increase the number of bids at a greater pace is possible if necessary.
“These central banks are ready to readjust the provision of liquidity in US dollars as market conditions require,” the banks said in their statement. The effects of such pressures on the provision of credit to households and firms, both domestically and abroad.
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