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Europe

Central Banks Intervene in Financial Markets

At least six major central banks pumped billions of dollars of extra credit into financial markets amid fears that this week's crisis was drying up liquidity.

European Central Bank headquarters in Frankfurt

The European Central Bank said it would more than double funding operations

On Thursday, Sept. 18, the European Central Bank in Frankfurt said its dollar funding operations would more than double from the existing $50 billion (34 billion euros) to $110 billion.

The Bank of England said it would pump $40 billion into money markets as part of the move coordinated with the US Federal Reserve.

"These measures, together with other actions taken in the last few days by individual central banks, are designed to improve the liquidity conditions in global financial markets," the Bank of England said.

Moves aim to improve liquidity

The Bank of Japan conducted a currency swap deal with the Federal Reserve worth $60 billion in order to provide dollar funds to financial institutions.

The bank also injected 2.5 trillion yen ($23.9 billion) into the money market Thursday to stabilize Japanese markets affected by the fallout from the Monday collapse of US investment bank Lehman Brothers.

BOJ had pumped 5.5 trillion yen into the markets over the previous two days.

The ECB said the measures were "designed to address elevated pressures in the short-term US dollar funding markets" and "improve the liquidity conditions in global financial markets."

Speculation on Morgan Stanley

It said the ECB would obtain up to 40 billion dollars from the Federal Reserve by a swap.

Other participating banks were the Bank of Canada and the Swiss National Bank.

European share prices steadied after the cash injections.

Robert Halver, a markets analyst at Baader Bank, said in Frankfurt, "The central banks are letting liquidity flood through every crack to stop the domino effect among financial institutions."

He was referring to the series of crises that culminated Thursday in British bank Lloyds taking over mortgage lender Halifax Bank of Scotland for 12.2 billion pounds (15.3 billion euros; $22.2 billion).

There was speculation that Morgan Stanley of the United States might be the next merger candidate. The New York Times said in its online edition that it might be taken over by Wachovia.

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