Document Type

Case Study

Case Series

Central Bank Swap Lines


During the Global Financial Crisis of 2007–2009 (GFC), European financial institutions faced increased difficulty financing their US dollar–denominated assets as banks, money market funds, and other financial institutions pulled back funding. On December 12, 2007, the Federal Reserve announced two programs to address the situation by extending the reach of its liquidity providing operations. The programs were the Term Auction Facility, meant to improve liquidity for banks in the US, and currency swaps with European central banks, to facilitate dollar funding for financial institutions in Europe. The initial swap arrangements made up to USD 20 billion available to the European Central Bank (ECB) and up to USD 4 billion available to the Swiss National Bank (SNB). After the collapse of Lehman Brothers, a major US investment bank, in September 2008, the Fed added swap lines with 12 more central banks. The Fed also said, in October 2008, that it would provide an unlimited amount of dollars to the ECB, SNB, Bank of England (BoE), and Bank of Japan (BoJ). The Fed’s dollar liquidity swap lines were in use almost continuously from December 2007 to their expiration in early 2010. In May 2010, a few months after the swaps expired, the Fed announced that it reinstated dollar liquidity swap lines with the ECB, SNB, BoE, BoJ, and Bank of Canada, in response to renewed stress in short-term US dollar funding markets. In 2011, the Fed then announced that it had entered an arrangement with these five central banks that would allow the Fed, and each of the other central banks, to access liquidity in any of the currencies of the banks involved. The Fed announced in 2013 that the lines would become standing with no expiration date.