Central banks in delicate situation by Daniela Simkova

Christmas means a closed market for the banks. During this time banks can clean the "year-end balance sheet." The Leading central banks were not successful in tiding the blockades. There is a wide difference between the borrowings for banks and that for governments, which means that investors are careful in lending to the banks. The longer it will last, the more danger rises up to the prominence. A fear that banks could tighten the economy is getting higher and higher. Confidence is the most important factor in the bank system and this year it becomes strongly emphasized. Leading central banks are in a delicate situation. No one would like to see any of the big banks bagging for a cash on New Year. Therefore five central banks set up a plan which ensures transfer some $100 billion to the banking system kept in dollars. Markets hope that the money will have at least those who are in a financial crisis and is also afraid of the revelation of the banks situation. As a result, the Federal Reserve decided to lower interest rates by a quarter of a percentage, which was demonstrated as a rough implement in solving this crisis. Borrowing of money market needs remedy as fast as possible. Central banks don't want to rely just on the overnight borrowing, they need something different, funding over longer time, more precisely three months.

by Daniela Simkova for PocketNews (http://pocketnews.tv)

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