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How Fed Swap Lines Supported the U.S. Corporate Credit Market amid COVID-19 Strains

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Abstract

The onset of the COVID-19 shock in March 2020 brought large changes to the balance sheets of the U.S. branches of foreign banking organizations (FBOs). Most of these branches saw sizable usage of committed credit lines by U.S.-based clients, resulting in increased funding needs. In this post, we show that branches of FBOs from countries whose central banks used standing swap lines with the Federal Reserve (“standing swap central banks”—SSCBs) met their increased funding needs by accessing dollars that flowed into the United States through their foreign parent banks. This volume of dollar inflows accounted for at least half of the late March aggregate take-up at SSCB dollar operations.

Suggested Citation

  • Nicola Cetorelli & Linda S. Goldberg & Fabiola Ravazzolo, 2020. "How Fed Swap Lines Supported the U.S. Corporate Credit Market amid COVID-19 Strains," Liberty Street Economics 20200612, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:88138
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    Keywords

    dollar; swap line; central banks; foreign banking organizations; COVID-19;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services

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