The Monetary Authority of Singapore (MAS) has finalised a $60bn swap facility with the US Federal Reserve to offer US-dollar liquidity for financial institutions.
The move is aimed at easing the ongoing concerns in credit markets following the coronavirus (Covid-19) outbreak.
The coordinated central bank actions come amidst widespread fear that the global financial markets may breakdown under the strain of the Covid-19 pandemic.
The swap facility will be available for a minimum of six months.
MAS said that this pact is aimed at providing US-dollar liquidity to financial institutions in Singapore.
“MAS will work out the operationalisation of the facility in consultation with the Federal Reserve, and will provide details next week on how it will be implemented in Singapore,” MAS said in a statement.
The facility is available to all eligible banks in Singapore. They can borrow or deposit Singapore-dollar funds against specified collateral.
The US Fed executed currency swap agreement with central banks of Canada, Britain, Japan, the European Central Bank, and Switzerland on 15 March to ease strains in global funding markets.
It was later extended to nine central banks including MAS.
“These measures will reinforce the stability of the financial system in Singapore and support its role in providing credit and essential financial services to the economy,” the central bank of Singapore added.
Yesterday, the biggest banks in the US decided to stop buying their own shares in order to use those funds to lend to their customers affected by the coronavirus.
Faced with the growing financial distress of their individual and business clients, the banks are shifting their immediate priority from repurchasing their own stocks to extending loans to their customers.