Green Energy
Are you ready to get paid in Euros? Yen? British pounds? How about a whole new world currency?
Businessweek:
Central Banks Prepare to Distribute Foreign Currency at Home
By Craig Torres
Nov. 30 (Bloomberg) -- The Federal Reserve and five other central banks set up agreements to distribute each other’s currencies in the event of a global funding crisis.
Central banks agreed to establish temporary bilateral currency swap arrangements “so that liquidity can be provided in each jurisdiction in any of their currencies should market conditions so warrant,” the Fed said today in a press release, calling the agreement a “contingency measure.” The European Central Bank and the central banks of Canada, Japan, Switzerland and the U.K. agreed to the arrangements.
The bilateral agreements were announced alongside coordinated action by the six central banks aimed at boosting dollar liquidity. Bilateral swaps would enable, for example, the Fed to provide euros, Swiss francs, or British pounds to U.S. banks if needed. The accord allows a broader distribution of liquidity and allows a bank to deal directly with its home central bank, said Dino Kos, a former New York Fed executive vice president in charge of open market operations.
“At present, there is no need to offer liquidity in non- domestic currencies other than the U.S. dollar,” the Fed said in a statement. “The central banks judge it prudent to make the necessary arrangements so that liquidity support operations could be put into place quickly should the need arise.”
Michael Feroli, chief U.S. economist at JPMorgan Chase & Co., called the bilateral arrangements “a novel step and a curious feature of today’s announcement” that “are apparently being set up as a backup plan in the event of a worsening in global financial conditions.”
Tighten Funding
A sovereign default in Europe, for example, could tighten funding for hundreds of banks around the world. So rather than European operations of Citigroup Inc. or Morgan Stanley seeking euros from the ECB, the Fed could contribute to euro liquidity by doling out loans to those institutions in the U.S.
The central banks also agreed today to lower the cost of dollar swap arrangements. The premium banks pay to borrow dollars overnight from central banks will fall by half a percentage point to 50 basis points. A basis point is 0.01 percent.
The cut in the dollar swap rates is a message from central banks that says, “Please use it, and we are going to make it cheaper for you to use,” said Kos, now a managing director at the New York research firm Hamiltonian Associates Limited.
The dollar swap lines will be extended by six months to Feb. 1, 2013. The new pricing will be applied to operations starting on Dec. 5. The bilateral swap agreement is also in place through Feb. 1, 2013.
- Epaminondas To Fed: At Least Take Me Out To Dinner First
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Green Energy
Are you ready to get paid in Euros? Yen? British pounds? How about a whole new world currency?
Businessweek:
Central Banks Prepare to Distribute Foreign Currency at Home
By Craig Torres
Nov. 30 (Bloomberg) -- The Federal Reserve and five other central banks set up agreements to distribute each other’s currencies in the event of a global funding crisis.
Central banks agreed to establish temporary bilateral currency swap arrangements “so that liquidity can be provided in each jurisdiction in any of their currencies should market conditions so warrant,” the Fed said today in a press release, calling the agreement a “contingency measure.” The European Central Bank and the central banks of Canada, Japan, Switzerland and the U.K. agreed to the arrangements.
The bilateral agreements were announced alongside coordinated action by the six central banks aimed at boosting dollar liquidity. Bilateral swaps would enable, for example, the Fed to provide euros, Swiss francs, or British pounds to U.S. banks if needed. The accord allows a broader distribution of liquidity and allows a bank to deal directly with its home central bank, said Dino Kos, a former New York Fed executive vice president in charge of open market operations.
“At present, there is no need to offer liquidity in non- domestic currencies other than the U.S. dollar,” the Fed said in a statement. “The central banks judge it prudent to make the necessary arrangements so that liquidity support operations could be put into place quickly should the need arise.”
Michael Feroli, chief U.S. economist at JPMorgan Chase & Co., called the bilateral arrangements “a novel step and a curious feature of today’s announcement” that “are apparently being set up as a backup plan in the event of a worsening in global financial conditions.”
Tighten Funding
A sovereign default in Europe, for example, could tighten funding for hundreds of banks around the world. So rather than European operations of Citigroup Inc. or Morgan Stanley seeking euros from the ECB, the Fed could contribute to euro liquidity by doling out loans to those institutions in the U.S.
The central banks also agreed today to lower the cost of dollar swap arrangements. The premium banks pay to borrow dollars overnight from central banks will fall by half a percentage point to 50 basis points. A basis point is 0.01 percent.
The cut in the dollar swap rates is a message from central banks that says, “Please use it, and we are going to make it cheaper for you to use,” said Kos, now a managing director at the New York research firm Hamiltonian Associates Limited.
The dollar swap lines will be extended by six months to Feb. 1, 2013. The new pricing will be applied to operations starting on Dec. 5. The bilateral swap agreement is also in place through Feb. 1, 2013.
- Epaminondas To Fed: At Least Take Me Out To Dinner First
Fed may give loans to IMF to help euro zone: paperThe Federal Reserve, along with the 17euro zone national central banks, may help provide the International Monetary Fund with funds that could be used to aid debt-ridden states, a German newspaper said.Die...
-
The Bailouts Did So Well That Now We Are Going to Bail Out The EU Well whaddyathinkofthat? Hey, how about someone in D.C. decides that middle America is too big to fail for a change? Financial Times: European banks took big slice of Fed aid By Robin Harding...
- Your Money's No Good Here
US Recovery Is Far Off, Banks Are 'Basically Insolvent': Soros From CNBC: The healing of the banking system and housing markets is crucial to recovery. "The banking system, as a whole, is basically insolvent," Soros said.What's more, the...
- Banks Hoarding Cash, But There's A Bull Market Coming
From 3 Wood at Jammie Wearing Fool: With all the market unrest, and the year end reporting coming up soon, it appears that banks have resumed hoarding cash to make their balance sheet look better to investors.The cost of borrowing in dollars for one...
- Iran Withdraws $75 Billion From Europe
Does this mean that things are finally getting serious in the faceoff with Iran over their nuclear project? From Reuters: TEHRAN (Reuters) - Iran has withdrawn around $75 billion from Europe to prevent the assets from being blocked under threatened new...