The world's largest central banks, led by the US Federal Reserve System (FRS), announced joint measures to provide access to dollar liquidity amid problems in Western banks. The authorities fear a crisis of confidence and a massive outflow of capital from the financial system. The decision to provide simplified access to dollar liquidity is stated in the Fed's message. The Financial Times notes that such emergency measures were last taken during the coronavirus crisis.
Liquidity will be provided through the simplified provision of dollar loans. In addition to the Fed, the European Central Bank (ECB), the Bank of Japan, the Bank of England, the Central Bank of Switzerland, and the Bank of Canada will take part in the program. To increase access to dollar liquidity, regulators will move from weekly auctions to provide dollar liquidity to daily ones.
“The swap line network between these central banks represents a set of available, permanent facilities and serves as an important liquidity pillar to ease tensions in global financial markets, thereby helping to ease the impact of such strains on household and business lending,” the ECB said in a similar statement.
It follows from the message that the Fed will provide other central banks with special swap lines that will help solve problems with dollar liquidity. This will remain in effect until the end of April. The Financial Times notes that the message about the provision of emergency liquidity appeared immediately after the merger of the two largest Swiss banks, UBS and Credit Suisse, was announced. Experts fear that the problems of Credit Suisse may be perceived by the market as a serious risk, which will contribute to the deterioration of the situation in the global financial system.
The need for emergency measures was required against the background of a series of bank failures in the United States, where three banks closed at once in a week in mid-March. While the fall of Silvergate bank and Signature bank was taken relatively calmly by the market, the bankruptcy of Silicon Valley bank (SVB), one of the top 20 US banks in terms of assets and a backbone for thousands of start-ups around the world, raised serious concerns about the stability of Western banking. systems. In Europe, the main focus has shifted in favor of the Swiss Credit Suisse, which has shown problems throughout 2022 and will eventually be sold to another Swiss bank - UBS.