(RTTNews) - Monday, leading central banks across the globe announced additional measures to provide broad access to liquidity and funding to financial institutions. This is the latest in a string of coordinated measures by world central banks to tackle the fast spreading global financial market crisis.

Joint Action

The U. S. Federal Reserve along with the Bank of England, the European Central Bank, the Bank of Japan and the Swiss National Bank revealed further measures to boost liquidity in short-term U.S. dollar funding markets.

Accordingly, the BoE, ECB, and SNB will conduct tenders of U.S. dollar funding at 7-day, 28-day, and 84-day maturities at fixed interest rates for full allotment, the Fed said in a statement. The central banks will provide funds at a fixed interest rate, set in advance of each operation. The Fed statement read counterparties in these operations will be able to borrow any amount they wish against the appropriate collateral in each jurisdiction.

Consequently, sizes of the reciprocal currency arrangements or swap lines between the Fed and the BoE, the ECB, and the SNB will be increased to accommodate whatever quantity of U.S. dollar funding is demanded. The BoJ will be considering the introduction of similar measures, the statement said.

Central banks reiterated that they will continue to work together and are ready to take whatever measures are necessary to provide sufficient liquidity in short-term funding markets.

Fed

The FOMC has authorized the increase in the sizes of its temporary swap facilities with the BoE, the ECB, and the SNB, so that these central banks can provide U.S. dollar funding in quantities sufficient to meet demand. The Fed said the arrangements have been authorized through April 30, 2009.

Bank of England

The BoE said in a statement that its swap line with the Federal Reserve has been amended so that there is no fixed limit to the amount of dollar liquidity that can be supplied to the banking system. The UK central bank will hold tenders of US dollar funding at one week, one month and three month maturities, at fixed interest rates with counterparties able to borrow any amount against eligible collateral. The central bank will hold the first tender on October 15, the settlement of which will be on October 17 and maturity on October 24.

Further, the central bank said the new fixed-rate tender for one week dollars replaces the previously announced one-week variable rate dollar auctions. The extended list of collateral will apply as revealed on October 3.

On October 14, the BoE will hold a variable rate auction for $30 billion for same day settlement, with maturity on October 17 in order to maintain the existing supply of US dollar liquidity from its dollar repo operations. The central bank said the existing overnight dollar auctions will continue as previously announced and be kept under review.

ECB

In a statement, the central bank for the 15-nation Eurozone economy said the the Eurosystem will, every Wednesday, conduct a liquidity providing US dollar operation with a term of 7 days, starting October 15. Going forward, all future auctions with a term of 7 days, 28 days and 84 days will be conducted at a fixed rate with full allotment.

The 28-day and 84-day US dollar operations will be held according to the schedule released on October 7, the ECB said. The central bank noted that the daily US dollar overnight operations will be conducted only if necessary in view of market developments as of October 16. “These measures will be in place as long as needed, and at least until January 2009″, the ECB concluded.

SNB

The SNB said it will, every Wednesday, hold a US dollar repo auction with a term of 7 days, beginning October 15. The Swiss central bank also said all future auctions with a term of 7 days, 28 days and 84 days will be conducted at a fixed rate with full allotment. The SNB added that US dollar overnight auctions will be conducted if necessary in view of market developments.

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Posted in Categories: Economy, Eurozone, Forex, Japan, Releases, Stocks, Switzerland, UK, USA.

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