There’s a great story from Reuters at the SMH today:
Britain orchestrated this week’s bold move by central banks to stave off a cash crunch in global markets, helping drive a plan that began to take shape around 10 days ago.
For months, central bankers have tracked with growing concern how the deleveraging among European banks, hurt by the tumbling value of euro-zone debt, was hurting global funding as banks sold off assets and brought cash back home.
Last week, conditions grew particularly acute after a German bond auction failed to attract enough buyers. The Federal Reserve and the European Central Bank started serious discussions around the middle of last week, banking officials in Europe and the United States told Reuters.
Bank of England Governor Mervyn King said he called the meetings that led to the decision by six of the world’s major central banks to cut dollar funding rates to keep money flowing through the world’s financial arteries.
“It was the result of conversations which I initiated as chairman of what used to be known as the G10 governors, now the economic consultative committee, among a limited number of central banks,” he told a news conference in London on Thursday.
The decision by the US Federal Reserve, the European Central Bank and the central banks of Japan, Canada, Britain and Switzerland to provide cheaper US dollar funding for banks eased credit strains and provided a fillip to market sentiment.
Short-term funding costs eased yesterday for the first time since July 22, when the latest phase of the euro-zone crisis took hold after European Union leaders failed to lay out detailed plans for a strong bailout fund.
Several banking officials said there was no specific trigger for the action, and specifically denied rumors that a European bank was on the brink of collapse. Instead, they characterised the action as the culmination of many weeks of worry as financial strains had built.
Even emerging markets, notably Eastern Europe and Asia, were feeling the pinch as European banks pulled back lending operations and put assets on the block, two banking officials said. Local banks that took up the slack had less access to dollar funding for their clients, bank officials said.
In the announcement, the six central banks said they also were ready to make money available in currencies other than their own, if necessary.
“They wanted to ensure that a dollar crunch did not brake economies in Asia, in the United States,” said Austrian Finance Minister Maria Fekter.
Worth clicking through for more. The intellectual leadership of UK regulatory authorities in the GFC period is a great untold story.
