Six Major Central Banks Permanently Made Currency Swap Agreement

Six Major Central Banks Permanently Made Currency Swap Agreement.

Six major central banks in the world U.S. Federal Reserve, Bank of England, The Bank of Japan, European Central Bank, Central bank of Canada and Central bank of Switzerland made currency swap arrangements permanent on October 31, 2013 as a prudent liquidity backstop in case of future global financial strains. Previously these banks had temporary bilateral currency swap arrangements.

According to Wikipedia, A currency swap is a foreign-exchange agreement between two institutions to exchange aspects (namely the principal and/or interest payments) of a loan in one currency for equivalent aspects of an equal in net present value loan in another currency; see foreign exchange derivative. Currency swaps are motivated by comparative advantage. A currency swap should be distinguished from a central bank liquidity swap.

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