U.S. dollar liquidity swap facilities…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,” according to a late Sunday night, May 9 announcement. The Fed also announced on May 10 a temporary “U.S. dollar liquidity swap arrangement with the Bank of Japan.”
The Bank of Canada, the Bank of England, and the European Central Bank will all take part in the temporary liquidity setup. The arrangements are intended to ease liquidity in light of the market unease late last week as the bailout of Greek sovereign debt was announced and fear spread about which other countries, banks and markets could also be affected. Saturday May 8, the European Union announced a bailout for Greece that amounted to about $1trillion.