Central banks put forward new plan to provide dollar loans
Major central banks around the world will co-operate to offer three-month US dollar loans to commercial banks in order to prevent money markets from freezing up in the wake of Europe's sovereign debt crisis.
The ECB said yesterday it would hold three fixed-rate operations between October and December to provide banks as many dollars as they needed in order to ease any funding crunch over the year-end.
"The European Central Bank has decided, in co-ordination with the Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank, to conduct three US dollar liquidity-providing operations with a maturity of approximately three months covering the end of the year," the ECB said.
The announcement sharply boosted European bank shares and the euro. Shares in French bank BNP Paribas climbed as much as 22pc from the previous day's close before ending 13pc higher.
Some banks are finding it hard to obtain dollar funding for periods of longer than a few days as US money-market funds and other traditional dollar lenders become increasingly nervous about the threat of a Greek debt default, which could destabilise markets throughout the region.