(MENAFN) Six major central banks, including the United States Federal Reserve, announced a coordinated effort on Sunday to increase the flow of US dollars in the global financial system through swap line arrangements. Along with the Bank of Canada, Bank of England, Bank of Japan, the European Central Bank, and Swiss National Bank, the regulators plan to "enhance the provision of liquidity via the standing United States dollar liquidity swap line arrangements" by increasing the frequency of seven-day maturity operations from weekly to daily. Swap lines are agreements between two central banks to exchange currencies, with the aim of allowing one of the central banks to obtain liquidity in a foreign currency that can then be forwarded to commercial banks in that country that need the funding.

This move is expected to 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 operations are set to begin on Monday and will continue at least through the end of April. The announcement comes amidst concerns over the impact of the COVID-19 pandemic on the global economy, and the need for measures to ensure the stability of financial markets.

The announcement also follows the emergency takeover of Credit Suisse by UBS, Switzerland's largest lender, in a deal brokered by the Swiss government. Credit Suisse, one of the 30 globally systemically important banks, faced the risk of insolvency amid an outflow of investors and customers following a string of scandals and losses. Experts warned that the bank's failure could have had a significant impact on the entire global financial system. The coordinated effort by the central banks to increase liquidity in the financial system is seen as a timely and necessary measure to ensure the stability of the global financial system amidst the ongoing economic uncertainties.

MENAFN21032023000045014146ID1105824397