Existing temporary liquidity swap arrangements would be converted into standing arrangements, the US Federal Reserve, the European Central Bank, the Bank of England, and the central banks of Japan and Switzerland announced in a joint statement Thursday.

The financial policy instrument would remain in place until further notice as it had proven to be a prudent liquidity backstop, the six central banks announced.

“The existing temporary swap arrangements have helped to ease strains in financial markets and mitigate their effects on economic conditions,” they added in the statement.

The so-called swap lines enable the institutions to ensure that banks in their home countries can always borrow ready cash from them in any of the currencies involved. The central banks first introduced them on a bilateral basis six years ago as the global financial crisis led to a credit crunch that was threatening to starve banks of liquidity, subsequently hitting the real economy.

On Thursday, Bank of Japan Governor Haruhiko Kuroda told reporters in Tokyo that the arrangements had helped bring stability to markets, and the decision to make them permanent did not mean any new alarm about the global financial system.

“We decided to make them permanent to avoid uncertainty as they were due to expire next February,” he said.

Kuroda also said that the heads of the six institutions had no intention of extending the swap arrangements to other central banks.

uhe/mkg (Reuters, AFP, AP)