The U.S. Federal Reserve (Fed) is working with five other central banks to ensure global access to U.S. Dollars.
The
coordinated action is intended to reduce strain on global funding
markets amid turbulence in the banking sectors of the U.S. and Europe.
- The Fed and the central banks of five other major economies announced on Sunday that they will cooperate to make so-called "swap lines" more frequent.
- The global network of swap lines provides foreign institutions access to financing in U.S. Dollars.
- The lines used to operate on a weekly schedule but from today they will be held on a daily basis until the end of April.
- The
coordinated action was announced by six central banks including the
Fed, the Bank of Canada, the Bank of England, the Bank of Japan, the
European Central Bank, and the Swiss National Bank.
Zoom Out:
- When the U.S. financial system is under stress, it can result in Dollar funding shortages that make it harder for investors to move their money.
- The
plan to increase the frequency of swap line arrangements is intended to
reduce potential shortages in Dollar-based financing.
- The announcement comes after Swiss bank UBS agreed to acquire its troubled competitor Credit Suisse for $3.25B in a bid to shore up confidence in financial markets.
- The acquisition came amid turbulence in the global financial system following the seizure of Silicon Valley Bank and Signature Bank by federal regulators earlier this month.
