6 central banks to boost flow of US dollar through global financial system

Central banks have moved globally to keep credit flowing after an unsettled period in the US banking sector and the Credit Suisse merger.

Six central banks, including the Bank of England, announced they would boost the flow of US dollars through the global financial system, the BBC reported.

On Sunday, the struggling Credit Suisse was taken over by UBS in a Swiss government backed deal.

The US dollar liquidity "swap line" arrangement will run from Monday.

In a statement, the Bank of England, Bank of Japan, Bank of Canada, the European Central Bank, US Federal Reserve and Swiss National Bank launched the co-ordinated action to "enhance the provision of liquidity".

The announcement said it served as an "important backstop to ease strains in global funding markets" and to lessen the impact on the supply of credit to households and businesses.

Instead of borrowing on the open market, British banks will be able to go direct to the Bank of England, and it will borrow from the US Federal Reserve.

It will work in the same way for banks in the eurozone, Canada, Japan, Switzerland and the US, the BBC reported.

Banks will be able to access this funding on a daily basis.

The arrangement, adopted during the 2008 financial crisis and the Covid pandemic, will start on Monday and continue until "at least through the end of April", the Bank of England said.

Global banking stocks slumped following the collapse of Silicon Valley Bank (SVB), despite reassurances from President Joe Biden the US would do "whatever is needed" to protect the banking system.

Since SVB's collapse, the smaller Signature Bank also fell by the wayside and First Republic needed rescuing, the BBC reported.

A subsidiary of New York Community Bancorp -- Flagstar Bank -- has reached a deal with regulators to buy Signature Bank assets, the US Federal Deposit Insurance Corporation (FDIC) on Sunday.

The deal involves almost all of Signature Bank's deposits, some of its loans, and all 40 of its former branches.

--IANS

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