Central banks team up to ensure dollar liquidity

Central banks from around the world, including the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank, have come together to announce a coordinated action to enhance the provision of liquidity via standing U.S. dollar liquidity swap line arrangements.

To increase the effectiveness of these swap lines in providing U.S. dollar funding, the participating central banks have agreed to increase the frequency of seven-day maturity operations from weekly to daily. These daily operations will begin on Monday, March 20, 2023, and will continue at least until the end of April.

The network of swap lines between central banks provides an essential liquidity backstop, which serves to ease strains in global funding markets. This, in turn, helps to mitigate the effects of such strains on the supply of credit to households and businesses. The standing facilities are readily available and offer important support to the global financial system.

This coordinated action by central banks will help to support the global financial system and aid in the provision of credit to households and businesses. With increased frequency, these swap lines will be better equipped to address any future market strains, which will be essential in supporting the global economy as it continues to recover from the impacts of the pandemic.