Central banks make liquidity swaps permanent

Central banks make liquidity swaps permanent

Six major central banks have agreed to convert existing temporary bilateral liquidity swap arrangements into standing agreements.

The banks - the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank - said the agreements would constitute a network of bilateral swap lines between them.

The agreements allow the provision of liquidity in each jurisdiction in any of the other five currencies foreign to the jurisdiction, should the two banks in each particular swap agree that market conditions warrant such action in one of their currencies.

The central banks said that the existing temporary agreements had "helped to ease strains" in financial markets and mitigate their effects on economic conditions. They added that the standing arrangements would "continue to serve as a prudent liquidity backstop".

The standing arrangements will remain in place until further notice.