6 central banks agree on currency swap
Print Edition
Six of the world’s leading central banks, including the US Federal Reserve, will provide each other with ready supplies of their currencies on a standing basis, extending arrangements set up to steady the global financial system during post-2007 turbulence.
The decision announced yesterday extends currency swap arrangements that until now had been considered temporary measures.
The central banks are: the Fed, the European Central Bank, the Bank of Japan, the Bank of England, the Bank of Canada and the Swiss National Bank.
The so-called swap lines enable those central banks to make sure banks in their home countries can always borrow ready cash from them in any of the currencies involved, should they need it.
The ECB said the arrangements “have helped to ease strains in financial markets” and “will continue to serve as a prudent liquidity backstop.”
The Fed and the ECB started their first dollar-euro swap arrangement in December 2007. Subsequent bilateral deals between the different banks were added during the financial turbulence that followed, which included the collapse of US investment bank Lehman Brothers in 2008, plunges on stock markets, the subsequent recession and Europe’s crisis over too much government debt in several countries.
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