The Federal Reserve of the United States (Fed), the Bank of Canadathe Bank of Englandthe Bank of Japanesehe European Central Bank and the National Bank Swiss they announced a coordinated action to prevent a global bank run and a collapse in the markets.
The decision complements the announced purchase of the Credit Suisse by its archrival the Union of Swiss Banks (UBS)in an effort by the Swiss government to winnow the crisis of mistrust and lack of financing in the second financial entity of the European country.
UBS retained Credit Suisse and will pay US$3.25 billion
The Fed reported in a statement on an agreement to improve the provision of liquidity through permanent swap facility agreements (liquidity swaps), in US dollars.
global tensions
The official statement, issued in Washington, says the Fed and its peers indicated the move was taken “to improve the effectiveness of swap lines in providing funding in US dollars.”
“Central banks currently offering US dollar trading have agreed increase the frequency of trades with seven-day expiration from weekly to daily“, indicates the joint document.
Later, it is pointed out that “these daily operations will begin tomorrow, Monday March 20 and will continue at least until the end of April“.
It serves as an important liquidity backer to ease stress in global financing markets, thus helping to mitigate the effects of such stress on the supply of credit to households and businesses.
The joint communiqué pointed out that “the network of swap lines between these central banks is a set of permanent facilities available and serves as an important liquidity support to ease tensions in global funding markets thus helping to mitigate the effects of such tensions on the supply of credit to households and companies”.