"Strengthening Dollar Liquidity Supply" US Fed Issues Joint Statement with 5 Major Central Banks

Dallas Swap Maturity Operation Changed from 'Week' to 'Day' Unit
"Will Contribute to Easing Household and Corporate Credit Pressure"

On the 19th (local time), the U.S. Federal Reserve (Fed) and five major central banks jointly announced measures to expand dollar liquidity through currency swap agreements. This move aims to alleviate fears of global financial system instability spreading following the recent collapse of Silicon Valley Bank (SVB).

On the same day, the Fed, along with the Bank of Canada (BOC), the Bank of England (BOE), the Bank of Japan (BOJ), the European Central Bank (ECB), and the Swiss National Bank, issued a joint statement announcing that the maturity operation frequency of dollar swaps will change from the current 'weekly' basis to a 'daily' basis. This measure to improve the efficiency of the swap lines providing U.S. dollar funds will begin on the 20th and continue at least until the end of April.

The Fed explained, "This is a measure to strengthen liquidity supply through the U.S. dollar liquidity swap line agreements," adding, "By playing a critical liquidity support role to ease pressure in global funding markets, it will contribute to alleviating credit supply pressures on households and businesses."

A currency swap agreement means that two countries agree to exchange different currencies at a predetermined exchange rate at a certain point in time. Amid the recent spread of the SVB collapse's impact across the global financial sector, concerns are rising that major central banks may face dollar liquidity shortages. Accordingly, this measure aims to facilitate the supply of dollar liquidity to ease funding difficulties for banks in each country and minimize financial system instability.

Since the collapse of the U.S. SVB on the 10th, fears in the global financial market have been spreading with the bankruptcy of Signature Bank in the U.S. and the Credit Suisse (CS) crisis. With Switzerland's UBS ultimately deciding to acquire CS, the financial sector is closely monitoring how far the impact of this situation will spread.