Monday, the U. S. Federal Reserve along with the Bank of England, the European Central Bank, the Bank of Japan and the Swiss National Bank announced further measures to boost liquidity in short-term U.S. dollar funding markets. The central bank joint action is meant to provide broad access to liquidity and funding to financial institutions.
Accordingly, the BoE, ECB, and SNB will conduct tenders of U.S. dollar funding at 7-day, 28-day, and 84-day maturities at fixed interest rates for full allotment, the Fed said in a statement. The central banks will provide funds at a fixed interest rate, set in advance of each operation. The Fed statement read counterparties in these operations will be able to borrow any amount they wish against the appropriate collateral in each jurisdiction.
Consequently, sizes of the reciprocal currency arrangements or swap lines between the Fed and the BoE, the ECB, and the SNB will be increased to accommodate whatever quantity of U.S. dollar funding is demanded. The BoJ will be considering the introduction of similar measures, the statement said.
Central banks reiterated that they will continue to work together and are ready to take whatever measures are necessary to provide sufficient liquidity in short-term funding markets.
The FOMC has authorized the increase in the sizes of its temporary swap facilities with the BoE, the ECB, and the SNB, so that these central banks can provide U.S. dollar funding in quantities sufficient to meet demand. The Fed said the arrangements have been authorized through April 30, 2009.
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