The Swiss central bank borrows $6.3 billion from the Fed in one week. Isn’t there some credit institution in big trouble?
As reported by Reuters, the Swiss National Bank withdrew nearly $6.3 billion from the US Federal Reserve's foreign exchange swap line this week, about double from the previous week, according to data from the New York Fed released Thursday.
The SNB withdrew $6.27 billion in US currency on Wednesday over a seven-day maturity at an annualized rate of 3.33%. A week earlier, it had drawn $3.1 billion at the same maturity and rate.
The two transactions were larger than all the drawdowns the SNB made in spring 2020, when the SNB and other central banks turned to the Fed for billions of dollars amid the global market panic that erupted in the early days of the coronavirus pandemic.
The SNB is one of five foreign central banks with which the Fed has established permanent currency swap lines. Such facilities are also available to the European Central Bank, the Bank of Japan, the Bank of England and the Bank of Canada and allow these banks to provide dollar funding to financial institutions in their jurisdictions.
The ECB was the only other central bank to engage in swap operations with the Fed this week. It withdrew $211.5 million, up from $206.5 million the previous week, but within range of the ECB's typical weekly withdrawals over the past year. As you can see, these are minimal figures, compared to what was taken from the SNB which, among other things, is a smaller institution than the ECB. c
Swap lines tend to be underused in calm markets. The relatively limited use made of it in recent weeks, as markets have been hit by the Fed's hawkish policy stance in its battle against inflation and the BoE having to intervene in a UK bond market troubled by the fiscal plans of the new Conservative government, has been noted by analysts as an indication that markets, while fickle and sometimes thin, are not dysfunctional. This week's increase "is substantial, but nowhere near that of an acute crisis," Jefferies money market economist Thomas Simons wrote in a note to clients in which he analyzes the company's weekly balance sheet data. Fed. This is certainly true, the SNB is not intervening to support the Franc which, among other things, is not bad against the Euro. If anything, the doubt is that these dollars are channeled towards some banking institutions that find themselves in a specific difficulty in obtaining liquidity in dollars, perhaps due to the hedging of speculative positions or due to an increase in withdrawals from branches by international customers. Isn't there any other institution besides Credit Suisse that is losing liquidity?
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The article The Swiss central bank borrows $6.3 billion from the FED in one week. Isn't there some credit institution in big trouble? comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/la-banca-centrale-svizzera-prende-63-miliairdi-di-dollari-in-prestito-dalla-fed-in-una-settimana-non-e-che-ce-qualche-istituto-di-credito-in-grosse-difficolta/ on Wed, 30 Nov 2022 17:41:54 +0000.