May 9, 2010
Banks Reactivate Dollar Liquidity Funding Facility
The European Central Bank on May 10, decided to reactivate, in coordination with other central banks, the temporary liquidity swap lines with the Federal Reserve, and resume U.S. dollar liquidity-providing operations at terms of 7 and 84 days.
"These operations will take the form of repurchase operations against ECB-eligible collateral and will be carried out as fixed rate tenders with full allotment," the ECB said in a statement. The first operation will be carried out on May 11, 2010, it added,
The decision was in response to the re-emergence of strains in U.S. dollar short-term funding markets in Europe, and was taken by the Bank of Canada, the Bank of England, the European Central Bank (ECB), the Federal Reserve, and the Swiss National Bank.
These facilities are designed to help improve liquidity conditions in U.S. dollar funding markets and to prevent the spread of strains to other markets and other financial centers.
The Bank of Japan added that it will be considering similar measures soon.
Moreover, Central banks announced decision to continue to work together closely as needed to address pressures in funding markets.
AP
