The US Federal Reserve and other major central banks announced on Sunday a coordinated effort to improve banks’ access to liquidity, hoping to calm worries rattling the global banking sector.
The special drive will be launched Monday by the Fed and the central banks of Canada, the United Kingdom, Japan, the European Union and Switzerland.
The announcement came hours after Switzerland brokered the UBS takeover of its troubled Swiss rival Credit Suisse.
The central banks will step up so-called swap line operations, which give non-US central banks greater access to dollars.
“To improve the swap lines’ effectiveness in providing US dollar funding, the central banks currently offering US dollar operations have agreed to increase the frequency of 7-day maturity operations from weekly to daily,” the central banks said in a joint statement.
“The network of swap lines among these central banks is a set of available standing facilities and serve as an important liquidity backstop to ease strains in global funding markets, thereby helping to mitigate the effects of such strains on the supply of credit to households and businesses,” the statement added.
Markets have been riled by the failure of Silicon Valley Bank and fear of a shortage of liquidity as interest rates are raised to fight inflation.
In 2020, the Fed provided and later extended a similar swap line facility as the Covid-19 pandemic caused a global cash crunch.