(Agencies)
Updated: 2007-12-13 09:46

The swap line with the ECB would be for up to $20 billion, while the line with the Swiss National Bank would be for up to $4 billion.

The ECB said it would use the swap facility to offer European institutions dollar funding in any cases where European financial firms encountered "elevated pressures" in short-term credit markets.

ECB Vice President Lucas Papademos said the ECB's decision to lend US dollars to euro-zone banks would help them fund dollar liabilities such as off-balance-sheet investment vehicles, especially if the banks' size made it harder for them to buy dollars in the currency market.

"There is nothing that has worsened today in particular. Pressures have remained at a heightened level in recent weeks," he said at a news conference.

LUBRICATING THE MARKETS' WHEELS

The Bank of Canada also said it would launch a temporary auction facility, adding that it would expand the list of securities eligible as collateral for central bank loans.

The Bank of England said it would offer three-month loans against a wider range of collateral.

Special coverage: Subprime Crisis Aftermath Related readings:  No quick fix for US subprime mortgages  Americans criticize subprime plan from all sides  Bush to put freeze on subprime mortgages  European banks face bigger risks from subprime meltdown: ECB  Impact from subprime crisis more than expected

The moves come after interest-rate cuts by the Fed, the Bank of Canada and the Bank of England failed to soothe worries that banks would continue to pull back from lending.

Fed and ECB officials said the steps had been under consideration for some time and were not aimed at helping any particular institution, but instead were meant to help markets generally function more smoothly.

"This is not about particular financial institutions with particular problems. It is about market functioning," a senior Fed official said, adding that the announcements were not in response to Wall Street's disappointment with the US central bank's decision on Tuesday.

The official said the Fed hoped that banks reticent to borrow at the discount window out of concern they could be seen as being in financial distress might be more willing to use the auction facility, which would provide the cloak of anonymity.

Investors and policy-makers have been caught off guard by how hard the broadly rising defaults on US subprime mortgages have hit the markets and the nation's economy.

As roughly 1.8 million adjustable rate mortgages line up for reset at sharply higher interest rates in 2008, homeowners and banks may face more pain ahead.

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