MNI POLICY: Saw Decisive and Concerted CB Action In March: BIS

--BIS Chief Economist Shin Tells MNI Event Fed Dollar Actions 'Imaginative'

     LONDON (MNI) - Decisive action by the Fed and other leading central banks

helped to normalize markets in the immediate aftermath of the coronavirus

pandemic, Bank for International Settlements Chief Economist Hyun Song Shin told

an MNI online forum Thursday.  

     Although there was no single announcement of coordinated action as has been

seen in the past, "visible cooperation emerged via the reactivation of the

central bank swap lines, which kicked in very early in the acute phase of the

financial sudden stop back in March," said Shin, who was addressing the topic of

central banks during pandemics.

     In addition there were 9 other banks that essentially received dollar swap

line facilities in record time -- much sooner than happened in 2008, adding to

the sense of a concerted response, he said.

     The Fed was "quite imaginative," in dusting off old facilities and

"tailoring new liquidity facilities to the specific features of the liquidity

stress happening at the time," according to Shin.

     --FIMA REPO

     The Fed's FIMA repo facility was useful in easing pressure in the Treasury

market as investors sought to raise cash, a shift from the global financial

crisis where the pressure was in the banking sector. That facility allowed

central banks to borrow dollars against U.S. Treasury collateral -- thus

stopping a potential glut of Treasury sales as many sovereigns boosted

liquidity.

     Shin again praised the Fed, noting it played an important role as the

guardian of the preeminent reserve currency.

     Continual dialogue between central bank policymakers through the BIS and

other fora has also been a very important element in bringing financial

conditions back to normal, Shin said. 

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

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