MAS to extend US$60b swap facility with US Fed

THE Monetary Authority of Singapore (MAS) announced on Thursday that it will continue to provide US dollar (USD) through the extension of the US$60 billion swap facility with the US Federal Reserve through March 31, 2021.

The MAS USD facility will offer up to US$60 billion of funding to banks, to facilitate USD lending to businesses in Singapore and the region.

Since its launch in March 2020, the MAS USD facility has provided about US$22 billion to banks, for use in Singapore and the region. As an international financial centre, Singapore plays a key role in intermediating cross-border USD funding within Asia.

The Fed's network of USD swap facilities with 14 central banks, including the MAS, provides a "critical" backstop for USD funding needs globally, and "contributed significantly" to central banks' efforts to maintain stability and normal functioning of financial markets during the Covid-19 pandemic, said MAS in a statement.

"These swap facilities will help sustain recent improvements in global USD funding markets and provide certainty to market participants that USD funding will remain available to meet their needs," added MAS.

"The extension of the MAS USD facility through March 31, 2021 will anchor market confidence and reinforce the stability of the financial system in Singapore."

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Singapore's central bank said that it continues to maintain a high level of Singdollar and USD liquidity in the banking system through its daily market operations, which complements the MAS USD facility as it ensures that funding to banks remains ample so that they can maintain the flow of credit amid the Covid-19 pandemic.

In a podcast interview earlier in May, MAS managing director Ravi Menon had said that the degree of stress seen globally in financial markets in March from a tightness in USD funding sparked by escalating pandemic concerns was enough for MAS to start contingency plans for a financial crisis. But the US Fed's establishing of swap lines with central banks such as MAS in March helped to turn that around.

Mr Menon had said the Fed's timely use of swap lines, which were "very creative new facilities", helped to stabilise markets.

"It was a period of great anxiety and stress for about two to three weeks, but quickly, that came under control in most of the region," he had said.

The implications of tighter greenback liquidity have been particularly acute in Asia, amid surging dollar-denominated activity in the region since the global financial crisis.