Investing.com - Financial Markets Worldwide

Central Banks Are More Pre-emptive This Time

ByThe National Bank of Canada
Published 12/26/2011, 03:03 AM
Updated 05/14/2017, 06:45 AM
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Global industrial production growth has come to a stall over the last couple months with European activity in contraction mode. Europe is looking like an extended recession is unavoidable, raising fear that the global economy is headed for a repeat of the 2008-09 great recession. It is true that some similarities are present like the signs of strain in the European banking system - for example the excessively wide spread between the Euribor rate and the overnight indexed swap. However we believe that this time will be different with global growth possibly able to withstand a European recession.


One big difference is that central banks, having gained experience from the 2008 crisis have already put in place several programs to support the global financial system. Last month various central banks announced coordinated action to enhance their capacity to provide liquidity to the global financial system. As seen in today’s Hot Chart these liquidity swaps are being tapped and are rising quickly as of late. This week the ECB opened wider the spigots of liquidity by providing a total of € 489bn in three year loans (net increase of approximately € 200bn) to over 500 banks.This proactive action of support is removing much of the concern tied to European bank debt maturing in Q1 2012. Central banks are doing their job as lenders of last resort. We now hope that global governments are wise and do their part too.




Central banks are more pre-emptive this time

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