For release at 8:00 a.m. EST
The Bank of Canada, the Bank of England, the Bank of Japan, the European
Central Bank, the Federal Reserve, and the Swiss National Bank are today
announcing coordinated actions to enhance their capacity to provide
liquidity support to the global financial system. The purpose of these
actions is to ease strains in financial markets and thereby mitigate the
effects of such strains on the supply of credit to households and businesses
and so help foster economic activity.
These central banks have agreed to lower the pricing on the existing
temporary U.S. dollar liquidity swap arrangements by 50 basis points so that
the new rate will be the U.S. dollar overnight index swap (OIS) rate plus
50 basis points. This pricing will be applied to all operations conducted
from December 5, 2011. The authorization of these swap arrangements has been
extended to February 1, 2013. In addition, the Bank of England, the Bank of
Japan, the European Central Bank, and the Swiss National Bank will continue
to offer three-month tenders until further notice.
As a contingency measure, these central banks have also agreed to establish
temporary bilateral liquidity swap arrangements so that liquidity can be
provided in each jurisdiction in any of their currencies should market
conditions so warrant. At present, there is no need to offer liquidity in
non-domestic currencies other than the U.S. dollar, but the central banks
judge it prudent to make the necessary arrangements so that liquidity
support operations could be put into place quickly should the need arise.
These swap lines are authorized through February 1, 2013.
Federal Reserve Actions
The Federal Open Market Committee has authorized an extension of the
existing temporary U.S. dollar liquidity swap arrangements with the Bank of
Canada, the Bank of England, the Bank of Japan, the European Central Bank,
and the Swiss National Bank through February 1, 2013. The rate on these swap
arrangements has been reduced from the U.S. dollar OIS rate plus 100 basis
points to the OIS rate plus 50 basis points. In addition, as a contingency
measure, the Federal Open Market Committee has agreed to establish similar
temporary swap arrangements with these five central banks to provide
liquidity in any of their currencies if necessary. Further details on the
revised arrangements will be available shortly.
U.S. financial institutions currently do not face difficulty obtaining
liquidity in short-term funding markets. However, were conditions to
deteriorate, the Federal Reserve has a range of tools available to provide
an effective liquidity backstop for such institutions and is prepared to use
these tools as needed to support financial stability and to promote the
extension of credit to U.S. households and businesses.
