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US Fed throws $30 billion into foreign credit markets
2008-09-24
WASHINGTON (AFP) - The US Federal Reserve threw another 30 billion dollars into foreign credit markets Wednesday to relieve high tension in demand for dollars, doing so-called swap deals with four central banks. This new door giving access to dollars takes the total of such swap deals to 277 billion dollars since the global financial crisis fell into a new vortex at the beginning of last week. The Fed said it was giving access to the extra funds to relieve "elevated pressures" in the US dollar short-term markets, revealing yet another signal of deep crisis in the global financial system. The swaps follow other such arrangements with leading central banks which are also injecting big and continuous rolling amounts of their own money into the banking market. The European Central Bank also made a regular refinancing Tuesday which revealed renewed tension on the European interbank market. The Fed said the latest lines concerned 10 billion dollars with each of the Australian and Swedish central banks, and five billion dollars with each of the Norwegian and Danish central banks. Such swaps enable financial companies abroad, including the subsidiaries of US groups, to access dollars via domestic refinancing arrangements in the local country, notably when US trading is closed for the night. The day after US Treasury Secretay Henry Paulson had warned that US credit markets were at risk of drying up if lawmakers did not not move urgently to approve a 700-billion-dollar rescue for US financial markets, the Fed said in a statement on its new swaps: "These facilities, like those already in place with other central banks, are designed to improve liquidity conditions in global financial markets. "Central banks continue to work together during this period of market stress and are prepared to take further steps as the need arises." The Fed said: "In sum, these new facilities represent a 30-billion-dollar addition to the 247 billion previously authorised temporary reciprocal currency arrangements with other central banks." It listed them as the ECB with a 110-billion-dollar swap, Bank of Japan 60 billion dollars, Bank of England 40 billion, the Swiss National Bank 27 billion and Bank of Canada 10 billion. All of the swaps facilities were valid up to January 30, 2009, it said. In Stockholm, the Swedish central bank, Sveriges Riksbank, said the facility was "a precautionary measure" which "further adds to the Riksbank's ability to provide a US dollar facility in Sweden, should the need arise." The governor of the bank, Stefan Ingves, said in a statement: "Our assessment is that financial stability in Sweden is satisfactory and that the Swedish banks are profitable and solvent." But he also said: "Sweden has been affected by the renewed wave of international financial unrest. We are following these developments closely and are working closely together with Swedish banks, market participants and government agencies."
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