Central banks announce coordinated effort to boost dollar funding

To improve the swap lines’ effectiveness in providing U.S. dollar funding, the Federal Reserve and five central banks have agreed to increase the frequency of seven-day maturity operations from weekly to daily, the Fed announced Sunday. Daily operations will begin March 20 and will continue at least through the end of April.

The network of swap lines among the central banks serves as a 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, according to the Fed. In addition to the Fed, the participating central banks are the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank. Read more.

In related financial stability news, the Fed and Treasury Department welcomed news that Zurich-based UBS had agreed to acquire the long-troubled systemically important bank Credit Suisse for $3.2 billion in a transaction assisted by the Swiss National Bank. “The capital and liquidity positions of the U.S. banking system are strong, and the U.S. financial system is resilient,” the agencies added. “We have been in close contact with our international counterparts to support their implementation.”