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ECB joins US Fed to quell world markets

AFP/The Local · 18 Sep 2008, 12:15

Published: 18 Sep 2008 12:15 GMT+02:00

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The ECB said it was offering another one-day tender to supply €25 billion to the distressed financial markets.

On Tuesday, the bank provided markets with €70 billion ($100 billion) to keep them supplied with liquidity in order to facilitate inter-bank lending. On Monday it pumped in €30 billion.

The ECB on Thursday also joined the US Federal Reserve in making an extraordinary statement of concerted action: "Today, the Bank of Canada, the Bank of England, the European Central Bank (ECB), the Federal Reserve, the Bank of Japan and the Swiss National Bank (SNB) are announcing coordinated measures."

These were "designed to address the continued elevated pressures in US dollar short-term funding markets." These measures, "together with other actions taken in the last few days by individual central banks, are designed to improve the liquidity conditions in global financial markets," they said.

"The central banks will continue to work together closely and will take appropriate steps to address the ongoing pressures."

In New York, the US Federal Reserve announced a $180-billion cash line to fight the wildfire on global financial markets. In an indication of the long-running nature of the already 14-month-old crisis, the Fed said the "reciprocal arrangements" by the central banks would run up to January 30, 2009, or for another four and a half months.

The Fed approved increases in the existing swap lines with the ECB of up to $110 billion and with the SNB of up to $27 billion.

New swap facilities were also authorized with the Bank of Japan (up to $60 billion), the Bank of England (up to $40 billion), and the Bank of Canada (up to $10 billion).

Story continues below…

The world's central banks have pumped hundreds of billions of dollars into money markets to ensure the supply of funds does not dry up after the collapse of US investment bank Lehman Brothers.

The US government bailout of major insurer American International Group has failed to quell worries over the global financial system, with stock markets around the world hit by a fresh round of selling.

AFP/The Local (news@thelocal.de)

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