Washington - The US Federal Reserve in a joint effort with the European and Swiss central banks on Friday expanded lending to banks struggling to raise capital amid an ongoing financial crisis. The Fed increased its offering through a bi-weekly Term Auction Facility - first created in December to help investment banks boost liquidity - from 50 billion dollars to 75 billion dollars.
The European Central Bank (ECB) boosted its own bi-weekly auction offering from 15 billion dollars to 25 billion dollars. The Swiss National Bank (SNB) said it would begin offering bi-weekly auctions of up to 6 billion dollars.
It is the latest in a series of measures taken by central banks to help financial institutions deal with billions of dollars in writedowns stemming from a mortgage-market meltdown that began in August.
The US central bank also widened the type of collateral it accepts from banks, including some bonds backed by student loans that have been hit as the mortgage crisis spreads to other sectors.
The banks in a joint statement said their latest action was taken "in view of the persistent liquidity pressures in some term funding markets."
The Fed has made nearly 500 billion dollars in Treasury securities available to investment banks and other lenders struggling to boost liquidity and already auctioned off about 200 billion dollars.
The expansion of the Term Auction Facility will increase to 150 billion dollars the amount still being offered up for auction under the programme. The Fed's TAF was first unveiled in December at a level of 40 billion dollars per month.
The Fed also expanded its currency swap lines with its two European counterparts, from 30 billion dollars to 50 billion dollars with the ECB and doubling its exchange with the SNB to 12 billion dollars.
