Central banks want to restore calm and provide additional loans to banks | Economy
The European Central Bank (ECB), the Federal Reserve and four other central banks will offer banks additional options for borrowing money in the coming period. This way, companies have enough money if their customers want to withdraw more in turbulent economic times.
The measure was announced just hours after the takeover of struggling Swiss bank Credit Suisse. The intervention aims to allay the fears of bank customers and investors.
Central banks are talking about an “important emergency liquidity measure”. The extra money they make should ensure that banks can continue to make enough loans to businesses and households.
The European Central Bank, the Federal Reserve Bank and the central banks of Switzerland, the United Kingdom, Japan and Canada offer so-called swap lines on a daily basis until at least the end of April. So far this has been happening once a week.
In the recently collapsed Silicon Valley bank, the lack of readily available funds (liquidity) was one of the issues. A large part of the money has been tied up in financial products.
The problems at Credit Suisse can also affect other banks. This is because shares in the Swiss bank and other financial products associated with the company have lost value.
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