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Bank of Canada Announces Swap Facility with U.S. Federal Reserve as part of Coordinated Central Bank Actions

In response to the re-emergence of strains in U.S. dollar short-term funding markets in Europe, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, and the Swiss National Bank are announcing the re-establishment of temporary U.S. dollar liquidity swap facilities.  These facilities are designed to help improve liquidity conditions in U.S. dollar funding markets and to prevent the spread of strains to other markets and financial centers.  The Bank of Japan will be considering similar measures soon.  Central banks will continue to work together closely as needed to address pressures in funding markets.

Bank of Canada Action

The Bank of Canada and the Federal Reserve have agreed to re-establishment of the US$30 billion swap facility (reciprocal currency arrangement) that had expired 1 February 2010. This facility would be accessed, should the need arise, to provide U.S.-dollar liquidity in Canada. If drawn on by the Bank of Canada, the swap would provide liquidity facilities for use by financial institutions in Canada that are similar in nature to those being announced today by the other central banks. This swap facility expires in January 2011.

This agreement provides the Bank of Canada with flexibility to address rapidly evolving developments in financial markets. The Bank judges that it is not necessary for it to draw on this swap facility at this time, but that it is prudent to have the agreement in place. Should the swap be drawn on, the details of the liquidity facilities provided would depend on the specific market circumstances at the time.

The Bank of Canada is closely monitoring global market developments and is committed to providing liquidity as required to support the stability of the Canadian financial system and the functioning of financial markets.

Information on Related Actions Being Taken by Other Central Banks

Information on the actions taken by other central banks is available at the following websites.
Bank of England
European Central Bank
Federal Reserve System
Bank of Japan
Swiss National Bank

For further information, please contact:
Jeremy Harrison
613 782-8782

Content Type(s): Press, Market notices