Ten days of secret planning to rescue markets
By David Milliken and Marc Jones
LONDON/FRANKFURT (Reuters) - Britain coordinated this week's bold move by central banks to stave off a cash crunch in global markets, helping drive a plan that began to take shape around 10 days ago.
Bank of England Governor Mervyn King said on Thursday he called the meetings that led to the decision by six of the world's major central banks to cut dollar funding rates to keep money flowing through the world's financial arteries.
"It was the result of conversations which I initiated as chairman of what used to be known as the G10 governors, now the economic consultative committee, among a limited number of central banks," he told a news conference in London.
The decision by the U.S. Federal Reserve, European Central Bank and central banks of Japan, Canada, Britain and Switzerland to provide cheaper dollar funding for banks eased credit strains stemming from the euro zone debt crisis and provided a longed-for fillip to market sentiment.
Funding costs dropped for the first time since the latest phase of the euro zone crisis took hold in late July.
The Fed and ECB started seriously discussing Wednesday's move around the middle of last week, one European banking source said, and the Fed's policy panel held a videoconference on Monday at which it agreed to cut the interest rate on its dollar swap lines.
Another source said provisional agreement was reached in a teleconference at the start of last week, and that by the end of the week details had been agreed and the date of November 30 set for the announcement.
Several officials said there was no specific trigger for the action, with some specifically denying it was a move taken because a European bank was on the brink of collapse. Continued...