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The Fed applies swap lines to emerging market economies

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Posted in Business News By Danlie

The application of swap lines to ensure that banks outside the US can access the US dollar easily, which is becoming difficult for many banks in the world due to the COVID-19 epidemic.

In the context of the COVID-19 is caused by the SARS-CoV-2 virus, which is disturbing the global financial market, on March 19, the Federal Reserve Bank of America (Fed) applied swap lines to support the supply of USD to central banks of some countries.

The application of a swap line to ensure that banks outside the US can access the US dollar easily, which is becoming difficult for many banks around the world in the context of the epidemic outbreak.

Emerging economies have suffered from the negative effects of the wave of divestments in the context of the complicated and widespread COVID-19 pandemic to many countries around the world.

The Fed said that this move was aimed at “reducing tensions in US dollar-financing markets around the globe,” thereby reducing the effects of the limited credit supply for households and businesses in domestic and foreign industries.

The Fed will provide $60 billion to each central bank of Australia, Brazil, Korea, Mexico, Singapore and Sweden and Denmark, Norway and New Zealand, which will get $30 billion.

These lines will be in place for six months and allow foreign central banks to convert local currency into USD.

On the same day, the head of the German state financial agency Hesse announced that the state government would disburse 7.5 billion euros (about 8 billion USD) in an attempt to resolve the COVID-19 epidemic crisis.

According to this official, the local economy will be supported by 1.5 billion euros to minimize the economic impact caused by the epidemic.

In the Netherlands, major Dutch banks, including ING Groep and ABN Amro, on March 19 agreed to allow small businesses to postpone interest payments for six months.

The Dutch Banking Association says these measures will apply to any loan that does not exceed 2.5 million euros (the US $ 2.7 million).

Meanwhile, ABN CEO Armo Kees van Dijkhuizen said that the delay of interest payment will be applied to 55,000 commercial banking clients. Accordingly, the bank will not collect interest and principal payments due in April through September from these clients and they can make these payments later.

Earlier, the Dutch government announced an economic support package to overcome the COVID-19 crisis, including emergency aid worth 22 billion USD for businesses, along with unemployment compensation for employees who are fired or quit.

In Spain, the second most affected country due to the COVID-19 epidemic in Europe after Italy, the Health Minister announced that the country would disburse 210 million euros ($ 227 million) to support local health care agencies in the fight against the COVID-19 pandemic.