By Kristina Cooke and Marc Jones
NEW YORK/FRANKFURT, Jan 27 (Reuters) – Major central banks on Wednesday said they will stop the emergency U.S. dollar lending introduced during the financial crisis, a significant milestone indicating growing confidence that the financial system is returning to health.
The decision, announced in coordinated statements, marked the first unified retraction of central banks’ extraordinary support for financial markets.
The European Central Bank, the Bank of England, the Bank of Japan and the Swiss National Bank, as well as the central banks of Canada, Australia, New Zealand, Mexico, Brazil and Sweden said they will let their dollar “swap” arrangements with the U.S. Federal Reserve expire on Feb. 1.
Demand for the dollar swap lines, through which the U.S. Federal Reserve provided billions of dollars to overseas financial firms via foreign central banks, has fallen dramatically as market conditions improve around the world.
“These lines, which were established to counter pressures in global funding markets, are no longer needed given the improvements seen in the functioning of financial markets over the past year,” the European Central Bank said in a statement. “Central banks will continue to cooperate as needed.”