OTTAWA (Reuters) - Canadian banks do not need immediate help from the Bank of Canada to manage their U.S. dollar funding needs, the central bank said on Thursday after announcing a $10 billion swap facility with the U.S. Federal Reserve to provide liquidity.
"Financial institutions in Canada do not appear to be experiencing difficulties in managing their U.S. dollar liquidity needs in North America," bank spokesman Jeremy Harrison said.
The world's top central banks joined forces on Thursday to throw a $180 billion lifeline to global markets in an effort to free up bank-to-bank lending.
The Canadian central bank said it judged it was not necessary at this time to draw on the swap facility but said it was prudent to have it in place. The facility will provide it with "additional flexibility to address rapidly evolving developments in financial markets," it said in an earlier statement.
The Bank of Canada has an existing permanent swap facility with the U.S. Federal Reserve for $2 billion but it has never drawn on it.
Shortly after the September 11, 2001, attacks on the United States, the bank augmented the facility to $10 billion but never felt the need to access it.
Ahead of engaging in any liquidity operations, the bank said it would announce the range of counterparties with which it would hold transactions, and any other policies, rules, and terms.
The facilities announced by other central banks can help them access U.S. funds in countries in Europe or in Japan at times when U.S. markets are closed. "Obviously, this time zone friction is not applicable to financial institutions in Canada," Harrison said.
The Bank of Canada added that it continues to closely monitor developments in global markets and is committed to providing liquidity as required.
(Reporting by Louise Egan; editing by Rob Wilson)
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