The European Central Bank, the US Central Bank (Fed) and the central banks of Canada, Japan, England and Switzerland will offer additional loan options to banks in the coming period. Organizations want to ensure that trust in the financial system is maintained.
The move means banks can more easily borrow US dollars from the Federal Reserve when needed. This usually happens once a week, but central banks can go to the Federal Reserve for dollars any day, at least until the end of April. Central banks can also lend dollars to private banks.
Something similar happened during the 2008 financial crisis and in the first phase of the corona epidemic, when the stock markets were also very turbulent. So-called “swap lines” are used when the availability of the dollar is under pressure. This currency is used by many banks to cover liabilities other than their own currency.
By measure, Americans want to ensure that there is enough money for loans to households and companies, for example. The Fed describes daily swaps as an important safety net to “delicate tensions in global financial markets.”
Takeover of the Swiss bank
Financial markets have been very restless for a while. This is due to the bankruptcy of three American banks and problems at Credit Suisse, the largest Swiss bank. This company was taken over by UBS, which is also Swiss, with the support of the Swiss government.
Without this, according to Federal President Berset, there would have been “unforeseen consequences” for the Swiss and international financial markets. UBS will pay $3.2 billion for the company. That’s significantly less than the roughly $8 billion stock market value the company still had as of Friday.
Dutch CEO of UBS Ralph Hamers will continue to run the company.
A large portion of American Signature Bank was also taken over. New York Community Bancorp took over the majority of the collapsed company for $2.7 billion.
The problems stem in part from the collapse of the US Silicon Valley bank. This caused great unrest in Silicon Valley:
Source: NOS
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
