13 September 2001

U.S., European Central Banks Will Provide Dollar Liquidity

In order to provide financial markets with liquidity in dollars, the Federal Reserve -- the U.S. central bank -- and the European Central Bank (ECB) have agreed on a swap arrangement that will allow the ECB to draw up to $50,000 million in U.S. dollar deposits held by the Federal Reserve in exchange for an equivalent amount of euros.

The two central banks took the action the day after the finance ministers and central bank governors of the Group of Seven major industrialized countries pledged to "provide liquidity to ensure that financial markets operate in an orderly fashion" in the wake of the terrorist destruction in New York.

The ECB will make the dollar deposits available to the national banks of the Eurosystem -- the 12 European countries that use the euro as their common currency. Those central banks will use the dollars to help meet the dollar needs of European banks, whose operations have been affected by the destruction in the United States.

Following is the text of the Federal Reserve's press release on the agreement:

(Note: In the text "billion" equals 1,000 million.)

Federal Reserve Release Press Release
September 13, 2001

In order to facilitate the functioning of financial markets and provide liquidity in dollars, the Federal Reserve and the European Central Bank have agreed on a swap arrangement.

Under the agreement, the ECB would be eligible to draw up to $50 billion, receiving dollar deposits at the Federal Reserve Bank of New York; in exchange, the Federal Reserve Bank of New York will receive euro deposits of an equivalent amount at the ECB.

The ECB will make these dollar deposits available to national central banks of the Eurosystem, which will use them to help meet dollar liquidity needs of European banks, whose U.S. operations have been affected by the recent disturbances in the United States. This swap line will expire in thirty days.