THE US Federal Reserve on Wednesday announced temporary 'swap' lines of credit with central banks in Brazil, Mexico, South Korea and Singapore to help those countries ease a credit squeeze.
The US central bank said it would be providing of up to US$30 billion (S$44.6 billion) in liquidity to each of the banks, Banco Central do Brasil, Banco de Mexico, the Bank of Korea, and the Monetary Authority of Singapore.
The actions come 'in response to the heightened stress associated with the global financial turmoil, which has broadened to emerging market economies,' the Fed said.
'These facilities, like those already established with other central banks, are designed to help improve liquidity conditions in global financial markets and to mitigate the spread of difficulties in obtaining US dollar funding in fundamentally sound and well managed economies.'
In a statement released on Thursday morning, MAS said the move is a 'precautionary measure' and 'part of coordinated central bank actions' to reassure financial institutions in Singapore, most of which have global operations, that they have access to US dollar liquidity.'
'MAS judges that it is not necessary to draw on the swap facility at this time, but will continually assess the need as global conditions develop.'
The swap facility has been authorised through 30 April next year.
The MAS emphasised that there is 'sufficient liquidity... to meet the needs of the banking system here,' and that it 'stands ready to take measures necessary to strengthen the orderly functioning of financial markets and the stability of the financial system in Singapore.'
On Tuesday, the Fed extended a temporary US$15 billion currency line to New Zealand's central bank to help it boost lending and unblock the global credit squeeze.
The FOMC has previously authorised such arrangements with the European Central Bank, the Bank of England, the Bank of Japan and the central banks of Australia, Canada, Denmark, Norway, Sweden and Switzerland.
[A comment online asked if Singapore was in trouble if we needed such a safety line extended to us. We would seem to be lumped together with Mexico and Brazil. Stable economies? How come M'sia, Indonesia are not extended this safety line. But South Korea was also extended the safety line. The US has also had arrangements with NZ, England, Australia, Canada, Denmark, Norway, Sweden, Japan, Switzerland and the European Central Bank. So we are in mixed if not good company. I too was concerned about the image or message this would send out, but I think this is a precautionary measure that is intended to assure and inspire confidence. Still, pessimists will read what they want out of this.]