Central banks reveal crisis action to shore up global system

30th November 2011, Comments 0 comments

Global central banks said on Wednesday they were acting in a coordinated way to reduce strains on the financial markets and boost lending to businesses and consumers.

The central banks of the eurozone, Canada, Britain, Japan, United States and Switzerland said in a joint statement they were lowering the cost of providing dollars to banks, pushing stocks in Europe sharply higher.

The central banks said they were engaging in "coordinated actions to enhance their capacity to provide liquidity support to the global financial system."

"The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity," they added.

The arrangement allows the central banks to lend dollars to commercial banks that might be finding it hard to borrow them directly from other banks and is aimed at easing tensions in the crucial interbank lending market.

The banks said they were not only reducing the cost of this operation, but also extending it until February 1, 2013.

European stocks bounced sharply on the news, with the German equity market up more than four percent, Spain and Italy more than three percent and France just shy of three percent.

The euro also bounced sharply on the foreign exchange markets.

© 2011 AFP

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