The central banks want to strengthen the stability of the financial system.
(Photo: dpa)
In view of the banking turmoil, the major central banks intervene. The Bank of England, the European Central Bank (ECB), the US Federal Reserve, the Bank of Japan, the Swiss National Bank and the Canadian central bank announced on Sunday action to boost liquidity via existing US dollar swap agreements.
The liquidity offensive is intended to strengthen the stability of the financial system, the Fed said in a statement. The surprising announcement came shortly after UBS’s takeover of Credit Suisse became known. ECB boss Christine Lagarde emphasized on Sunday: “The banking industry in the euro area is resilient and has strong capital and liquidity positions.” The ECB has all the necessary instruments to “supply the financial system of the euro zone with liquidity if necessary.”
Analysts initially reacted with concern to this initiative on Sunday. “When central banks rush to take action to make sure everything is fine, then things are actually not fine,” said Jeroen Blokland of analysis house True Insights. He advised continued caution when investing in risky asset classes such as stocks.
The Fed’s interest rate decision is due on Wednesday. There is currently a heated discussion on Wall Street about whether the banking crises in the USA and Switzerland will force Fed Chairman Jerome Powell to take a pause on interest rates. Blokland is currently no longer assuming that the Fed will hike rates.
More to come
More: All current developments in the banking crisis in the live blog