The European Central Bank and other major central banks have agreed on a coordinated action to safeguard the provision of credit institutions with cheap US dollar loans. This will serve as a liquidity backstop amidst the coronavirus pandemic and strengthen the supply of credit to households and enterprises. Bundesbank President Jens Weidmann welcomed the coordinated action.

“At the moment, having reliable access to US dollar liquidity is especially important for many banks and enterprises, including those in the euro area,” he commented. Mr Weidmann believes that this measure will play a key role in this regard. “The world’s major central banks are fulfilling their responsibility and acting in close cooperation,” he remarked.

The European Central Bank, the Federal Reserve, the Swiss National Bank, the Bank of Canada, the Bank of England and the Bank of Japan intend to implement the move via the standing US dollar liquidity swap line arrangements. In addition to the existing one-week operations, these central banks are now also offering weekly US dollar operations with an 84-day maturity within their respective jurisdictions. Moreover, they have agreed to lower the pricing on the standing US dollar liquidity swap arrangements by 25 basis Points.

“The new pricing and maturity offerings will remain in place as long as appropriate to support the smooth functioning of US dollar funding markets,” the ECB announced. The changes will come into effect as of the week of 16 March.