Federal Reserve and global central banks set to boost liquidity to ease crisis fears

The Federal Reserve of the United States has teamed up with other global central banks to establish new lines of U.S. dollar swaps in order to prevent liquidity issues amid the current turmoil in the U.S. and European banking sectors. This coordinated effort includes the Bank of Canada, Bank of England, Bank of Japan, European Central Bank, and Swiss National Bank, and was announced Sunday. According to the statement given by the central banks, daily operations to make funding available through standing swap lines will be launched, which grant foreign banks access to one another’s currencies. This is an update from previously weekly offerings.

The announcement comes in the wake of banking regulators shutting down SVB, the nation’s 16th-largest federally insured bank, after it announced the need to raise over $2.2 billion to stay afloat, causing its stock prices to drop by over 60% in two days. Another bank, Signature Bank, also recently closed, leaving many customers in doubt. The SVB failure is the second-largest in U.S. banking history, while Signature Bank is the third-largest. This caused uncertainty in several other regional banks and some larger lenders such as First Republic Bank, which accepted rescue packages from larger institutions to shore up liquidity.

Credit Suisse, a Swiss lender, also suffered from a record-low in its shares, requiring it to be acquired by rival bank UBS for financial stability. The acquisition was endorsed by the U.S. Treasury and Federal Reserve.

U.S. Treasury Secretary Janet Yellen tried to allay public fears by stating that the U.S. banking system “remains sound” as Monday’s market opening drew closer. Democrats have called for stronger regulations to prevent the collapse of smaller banks, while Republicans remain united against it.

CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER