RBA to help out global financial market

The Reserve Bank of Australia (RBA) has joined other central banks in working with
the US Federal Reserve to help improve liquidity in global financial markets.
The RBA and the Fed have set up a temporary reciprocal $US10 billion ($A12.04
billion) currency swap facility aimed at alleviating pressure in US dollar funding
markets.
The RBA was joined in its action with Fed by the Denmark, Norway and Sweden central
banks - Danmarks Nationalbank, Norges Bank and Sveriges Riksbank.
It follows similar arrangements set up by the Fed with the European Central Bank,
Bank of Japan, Bank of England, Swiss National Bank and Bank of Canada earlier this
month.
"These facilities, like those already in place with other central banks, are
designed to improve liquidity conditions in global financial markets," the RBA said
in a statement released simultaneously with a similar notice from the Fed.
"Central banks continue to work together during this period of market stress and are
prepared to take further steps as the need arises."
The RBA said its currency swap line with the Fed will address elevated pressures in
US dollar short-term funding markets in the Asian time zone.
The pair have agreed on a $US10 billion swap line to provide US dollar liquidity in
Australia, in exchange for Australian dollars.
"The swap serves to alleviate a shortage of US dollar liquidity, which has affected
market participants around the world including in the Asia-Pacific time zone," the
RBA said.
The US dollars will be made available, against collateral, to local market
participants by the RBA through an auction.
The first auction, for a 28-day swap, will be held on Friday.
Subsequent auctions will depend on market conditions.
The Fed will also have a $US10 billion currency swap line with Sweden's central
bank, a $US5 billion ($A6.02 billion) line with Norway's central bank and a $US5
billion line with Denmark's central bank.
The Fed said in its statement that the new swap lines announced represent a $US30
billion ($A36.11 billion) addition to the earlier temporary swap line arrangements
set up with other central banks, worth $US247 billion ($A297.3 billion), earlier
this month.
The RBA also said it will establish a domestic term deposit facility for banks that
will be used to enhance the flexibility of its local liquidity management
operations.
"To further enhance the flexibility of its domestic liquidity management operations,
the Reserve Bank will offer a short-term deposit facility, to be known as RBA term
deposits," it said.
The facility will be available to banks and financial institutions and the RBA will
conduct auctions at which the parties can bid for deposits.
The first auction, for a 14-day deposit, will be held on Monday, September 29.