The markets are experiencing major tensions since the bankruptcy of the “Silicon Valley Bank”, amid fears of a lack of liquidity after raising interest rates as part of efforts to combat inflation.
The central banks of the United States, Switzerland and other countries on Sunday announced a concerted move to provide more liquidity to reassure markets in the midst of a crisis of confidence in the banking system.
The extraordinary measure comes shortly after the acquisition of its rival, Credit Suisse, by Swiss bank UBS, in a process coordinated by the Swiss government with the aim of restoring confidence in the banking system.
Institutions decided to promote “swap lines,” mechanisms that give foreign central banks easier access to dollars.
Central banks will thus increase the pace of operations in dollars, and the statement indicated that “these operations, which have been conducted so far on a weekly basis, will become daily as of Monday, March 20, 2023. And they will remain at this rate until at least the end of April.”
And the “swap lines” network is a “liquidity safety net to calm tensions in global financial markets and thus contribute to mitigating the effects of these tensions on the supply of loans to households and companies,” according to central banks.
The markets have been witnessing major tensions since the bankruptcy of Silicon Valley Bank, amid fears of a lack of liquidity after interest rates were raised as part of anti-inflation efforts.
The Federal Reserve (the US central bank) had concluded and extended similar agreements in 2020 in the face of the repercussions of the Covid-19 pandemic.
The agreement was concluded between the central banks of Britain and Canada, the European Central Bank, Japan, Switzerland and the Federal Reserve.
