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As of December 21, 2010
U.S. Dollar Liquidity Swaps
Supplementary FAQs

Why has the Federal Reserve re-established temporary U.S. dollar liquidity swap facilities with foreign
central banks?
The swap facilities announced in May 2010 respond to the re-emergence of strains in short term funding
markets in Europe. They are designed to improve liquidity conditions in global money markets and to
minimize the risk that strains abroad could spread to U.S. markets, by providing foreign central banks
with the capacity to deliver U.S. dollar funding to institutions in their jurisdictions.
With which central banks has the Federal Reserve entered into swap facilities?
The Federal Reserve has established swap arrangements with the Bank of Canada (BOC), the Bank of
England (BOE), the European Central Bank (ECB), the Swiss National Bank (SNB), and the Bank of Japan
(BOJ).
How will the swap facilities function?
The swap lines with the ECB, BOE, SNB and BOJ will provide these central banks with the capacity to
conduct tenders of U.S. dollars in their local markets at fixed local rates for full allotment, similar to
arrangements that had been in place previously. The swap line with the Bank of Canada allows for
drawings of up to $30 billion. The terms, structure, and operational mechanics of these swap
agreements closely parallel the arrangements that expired on February 1, 2010. For reference please
see the attached link.
http://www.federalreserve.gov/monetarypolicy/bst_swapfaqs.htm
For how long are the swap facilities expected to be operational?
These swap arrangements have been authorized through August 1, 2011. Central banks may request
drawings on their swap lines up to the date of expiration.
Is the Federal Reserve exposed to foreign exchange or private bank risk in extending these lines?
No. Dollars provided through the reciprocal currency swaps are provided by the Federal Reserve to
foreign central banks, not to the institutions obtaining the funding in these operations. The foreign
central bank receiving dollars determines the terms on which it will lend dollars onward to institutions in
its jurisdiction, including how the foreign central bank will allocate dollar funds to financial institutions,
which institutions are eligible to borrow, and what types of collateral they may borrow against. The
terms governing these loans of dollars are in all cases released to the public by the foreign central
banks. As the Federal Reserve's contractual relationship is exclusively with the foreign central bank and
not with the institutions obtaining dollar funding in these operations, the Federal Reserve does not
assume the credit risk associated with lending to financial institutions based in these foreign
jurisdictions. The provision of dollars and receipt of foreign currency, and the receipt of dollars and
return of foreign currency at the swap’s maturity date, both occur at the same foreign exchange rate so
that the Federal Reserve is not exposed to movements in foreign exchange rates.

As of December 21, 2010

Will activity under the liquidity swap arrangements be disclosed to the public?
Yes, swap activity will be published weekly. The Federal Reserve has also released the underlying legal
agreements with foreign central banks.