The world’s major central banks announced Thursday that they have decided to make temporary liquidity measures more permanent in an effort to support financial markets.
The Bank of Canada (BoC), the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank announced that they have agreed to convert their existing temporary bilateral liquidity swap arrangements to standing arrangements, which means they will remain in place until further notice instead of expiring as scheduled in February 2014 (or needing to be renewed then).
“The existing temporary swap arrangements have helped to ease strains in financial markets and mitigate their effects on economic conditions. The standing arrangements will continue to serve as a prudent liquidity backstop,” they said in a statement.
The standing arrangements will form a network of bilateral swap lines among the six central banks, which allow for the provision of liquidity in each jurisdiction in any of the five currencies that are foreign to that jurisdiction, if they decide market conditions require it.For example, the BoC said the arrangements enable it to provide Canadian dollars to the other central banks, and to provide liquidity in British pounds sterling, Japanese yen, euros, Swiss francs and U.S. dollars to financial institutions in Canada, should the need arise.
The BoC and the U.S. Fed have also agreed to remove the US$30 billion limit to their reciprocal swap facility, it noted.
The BoC said that it is not necessary for it to draw, or offer operations on any of these swap facilities right now, “but that it is prudent to have these standing arrangements in place on an ongoing basis.”