OTTAWA - The U.S. Federal Reserve, the Bank of Canada and other central banks have taken further action to ease a deepening credit crisis that threatens to unhinge the international economy.
The Bank of Canada said Monday that it and the Federal Reserve have agreed to expand their reciprocal currency arrangement to US$30 billion, up from the US$10 billion announced Sept. 18.
This swap line "would be accessed, should the need arise, to provide U.S.-dollar liquidity in Canada," the Bank of Canada stated.
"If drawn on by the Bank of Canada, the swap would provide liquidity facilities for use by financial institutions in Canada."
The central banks said their co-ordinated action will expand the availability of cash to squeezed banks and other financial institutions, in an effort to relieve the most intense credit crisis since the Great Depression.
The Federal Reserve and the Bank of Canada cited "continued strains" in the short-term credit markets, in statements issued in parallel with the European Central Bank, the Bank of England, the Bank of Japan, and the central banks of Switzerland, Norway, Sweden, Denmark, Australia.
The Bank of Canada said the tripled support arrangement with the Fed provides "additional flexibility to address rapidly evolving developments in financial markets."
As it did on Sept. 18, the Bank of Canada said it is not necessary to draw on the swap facility now, but "it is prudent to have the agreement in place."
It added that it "continues to closely monitor global market developments and remains committed to providing liquidity as required to support the stability of the Canadian financial system and the functioning of financial markets."
Monday's action expands the Federal Reserve's swap arrangements with other central banks to US$330 billion.
On the U.S. domestic front, the Fed is tripling its 84-day loans available to American banks to $225 billion from $75 billion.
In Russia, meanwhile, Prime Minister Vladimir Putin up to US$50 billion in loans to help Russian banks and other companies pay foreign debts.
Confronting intensifying financial turmoil Putin said in televised comments that the money will be available through state-owned VEB, or Vnesheconombank.
