The Bank of Canada said it has agreed to reduce the interest rate on dollar liquidity swap lines by 50 basis points and extend their authorization through Feb. 1, 2013, as part of a global coordinated effort with five other central banks.
The Bank of Canada and the Federal Reserve have agreed to extend the $30 billion swap facility, the Ottawa-based central bank said in a statement.
“The Bank of Canada judges that it is not necessary for it to draw or offer operations on any of these swap facilities at this time, but that it is prudent to have these agreements in place,” it said in the statement. “Should these facilities be drawn on, the details of the liquidity facilities provided would depend on the specific market circumstances at the time.”
The Bank of Canada said it is closely monitoring developments in financial markets and remains committed to providing liquidity to support the stability of the Canadian financial system.
The central banks today also announced they agreed to set up temporary bilateral liquidity swap arrangements as a contingency measure.
The Bank of Canada said the introduction of the “expanded network of temporary swap lines” will enable the Bank of Canada to provide liquidity in the other currencies to financial institutions in Canada, and Canadian dollars to other central banks.