Central Banks to scale back emergency supply of US dollars

Friday 24 January 2014 11.45
During the crisis banks had borrowed US dollars from their central bank as funds dried up
During the crisis banks had borrowed US dollars from their central bank as funds dried up

The European Central Bank and other major central banks have said they are scaling back their emergency supply of US dollars to banks as economic and financial conditions improve.

The ECB, Bank of England, Bank of Japan and Swiss National Bank have decided to "gradually reduce" their offerings of US dollar liquidity-providing operations, the ECB said in a statement.

During the financial crisis, banks have sometimes been compelled to resort to their central bank to borrow US dollars when access to the funds dried up.

But fewer and fewer banks have been making use of the facility in recent months amid signs that the crisis is fading and economies are gradually recovering.

As a result, banks have found it easier to obtain financing via financial markets rather than having to resort to the central bank.

"In view of the considerable improvement in US dollar funding conditions and the low demand for US dollar liquidity-providing operations, the above-mentioned central banks will gradually reduce their offering of US dollar liquidity-providing operations," the ECB said.

The ECB said that it and the other central banks would continue to conduct US dollar operations at three-month maturity until 30 April.

One-week operations would be continued until at least 31 July.

"The ECB will, in due course, assess the need for one-week US dollar operations beyond July 31," the central bank said.