NEW YORK (Reuters) - The U.S. Federal Reserve extended its program to provide emergency currency swap lines to the European Central Bank last week as the euro zone’s sovereign debt crisis deepened, the Wall Street Journal reported on Wednesday.
The swap lines allow foreign central banks, including the ECB, the Bank of England and the Canadian, Japanese and Swiss central banks to borrow an unlimited amount of dollars for a fee and lend them out to banks in their home countries.
The program was set to expire Aug 1. Its extension was approved by a vote during last week’s Federal Open Market Committee meeting, the Journal said.
European officials have been working for weeks on a plan to help Greece avoid defaulting on its debt. Greece’s parliament was due to hold a key vote on an austerity plan on Wednesday.
A liquidity crunch similar to the one that occurred during the 2008 credit crisis was in danger of developing in Europe, where regional banks’ exposure to Greece and other struggling euro zone countries was making borrowing in the money markets difficult.
European banks need dollars to fund their dollar-denominated assets, such as mortgage bonds; in a crisis, dollars would be difficult to obtain.
Reporting by Emily Flitter; Editing by Padraic Cassidy