In order to maintain the flow of credit to individuals and businesses, the US Federal Reserve and a number of other significant central banks made a coordinated effort to increase the flow of US dollars through the international financial system on Sunday night.
“The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing a coordinated action to enhance the provision of liquidity via the standing US dollar liquidity swap line arrangements,” the central banks said in a joint statement.
CNN reported that the announcement on Sunday was made just hours after Swiss officials arranged for UBS to quickly acquire Credit Suisse.
One of the top 30 banks in the world financial system, Credit Suisse, was losing money last week as a result of the decline in investor and consumer confidence.
The second and third largest bank collapses in American history earlier this month set off market turmoil that could make it more difficult for customers to obtain loans, according to US Treasury Secretary Janet Yellen said last week.
“If banks are under stress, they might be reluctant to lend,” Yellen said Thursday in testimony to the Senate Finance Committee.
“We could see credit become more expensive and less available.”
The European Central Bank’s (ECB) head, Christine Lagarde, warned reporters that “persistently elevated market tensions” could further tighten credit conditions, which were already becoming more stringent in reaction to rising interest rates.