The world’s major central banks reached a swap agreement. The largest central banks decided to engage in a reciprocal swap agreement that would allow them to fulfill major currencies swap deals when required. Such transactions may be carried out in the yen, pound sterling, Swiss franc, U.S. dollar, and the Canadian dollar. This agreement pursues the aim to soften severe strains on global financial markets and hence to promote financial health. Back in 2007, the Federal Reserve System used to bring such agreements into force, though on a temporary basis, to fight against the global dollar shortfall. At the time of the financial crisis, those efforts enabled the monetary authorities to provide the foreign currency availability on their domestic markets. World-famous economists consider the above mentioned swap agreement as a forced and well-timed step. Thus, the rulebook establishing monetary swap schemes among central banks was ushered when the time was ripe for that. Last week, six central banks said that they were going to use liquidity swap lines on an ongoing basis until it is cancelled. In the meantime, several regulators including the U.S. Federal Reserve System, European Central Bank, Bank of Japan, Bank of England, Bank of Canada, and the Swiss National Bank have entered into the agreement. The European Central Bank’s officials state that the swap agreement is expected to facilitate stability on the world financial markets, in the banking system, and in the global economy on the whole.
