European Central Bank and others to wind down dollar lending to banks as markets improve

FRANKFURT – The European Central Bank said Friday that it and three other major central banks will wind down their dollar-lending operations amid improving market conditions.

The ECB, along with the Bank of England, the Bank of Japan and the Swiss National Bank, plans to stop lending dollars to banks for three-month periods at the end of April.

The ECB said the step was taken “in view of the considerable improvement in U.S. dollar funding conditions and the low demand for U.S. dollar liquidity-providing operations.” In other words, banks are getting by fine without having to tap the central banks for loans denominated in dollars.

The central banks will continue lending dollars over one-week periods until at least July 31. The ECB says it will address “in due course” whether such operations need to continue.

Central banks serve as lenders of last resort for banks, ensuring that banks always have credit available to keep operating even during times of turmoil.