The central banks of the United States, Switzerland and other countries on Sunday announced coordinated action to improve access to liquidity and thus reassure markets in the midst of a crisis of confidence in the banking system. The exceptional measure comes just after the takeover of Credit Suisse by UBS, an operation orchestrated by the Swiss government to restore confidence in the financial system.
The institutions have decided to strengthen "swap lines", a device that facilitates foreign central banks' access to dollars. The central banks will thus increase the frequency of dollar operations: "So far 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.
The network of swap lines serves as a "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. . Markets, in turmoil since the flash bankruptcy of Silicon Valley Bank, fear a liquidity crunch 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.
