On Sunday evening, March 19, 2023, at 5:00 p.m. Eastern Time, the U.S. Federal Reserve, along with several central banks including the Bank of England, Bank of Canada, Bank of Japan, the European Central Bank, and the Swiss National Bank, announced a coordinated action to enhance the provision of liquidity via the standing U.S. dollar liquidity swap line arrangements. The announcement followed a banking crisis that began with the collapse of three U.S. banks and spread internationally.
Turmoil in Banking Industry Leads to Coordinated Action to Enhance Liquidity
Before Wall Street opened on Monday and ahead of the next Federal Reserve meeting, the U.S. central bank, along with five other major central banks, announced decisive action to add liquidity to the financial system. The participating banks included the Bank of England, Bank of Canada, Bank of Japan, Swiss National Bank, and the European Central Bank (ECB). In fact, all participating central banks published similar press releases regarding the new measures.
“To improve the swap lines’ effectiveness in providing U.S. dollar funding, the central banks currently offering U.S. dollar operations have agreed to increase the frequency of 7-day maturity operations from weekly to daily,” the Federal Reserve announcement details. “These daily operations will commence on Monday, March 20, 2023, and will continue at least through the end of April.”
so central banks literally said a form of –
“Steady lads, deploying more capital”
— sol poor | $BONK enjoyeerr | 🔥💃 (@DeChDAO) March 20, 2023
The central banks’ latest plan is a popular topic of conversation on social media and forums, as many believe that monetary tightening policies are over. Arthur Hayes, the founder of Bitmex, tweeted about the situation, saying, It’s All Over!!! This [is] what happens when no one wants to hold USD in banks that can’t borrow from the Fed using #banktermfundingprogram. Not sure how the Fed can hike when it’s handing out dollars to its peers. Cut Cut Cut.”
From Tightening to Easing
The turmoil in the banking industry began after the fall of Silicon Valley Bank and Signature Bank. The U.S. Federal Reserve announced a plan to make all uninsured depositors of both institutions whole. Shortly after, the Swiss banking giant Credit Suisse showed severe signs of weakness and borrowed 50 billion francs from the Swiss National Bank. Swiss authorities then orchestrated an emergency takeover of…
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