The jury is still out on how successful the world’s top central banks can be in trying to get commercial banks to lend to each other.
The central banks have joined forces to throw a multi-billion euro lifeline to the financial markets; they are in turmoil because of the subprime mortgage collapse and the resulting upheavals among big financial firms.
The US Federal Reserve made an extra 126 billion euros available to be lent on to local commercial banks in a bid to get money circulating. The Bank of Japan put up 43 billion euros, the ECB 28 billion, the Band of England 10 billion and the Swiss seven billion.
But will it ultimately work and restore the balance to the system? In Frankfurt, analyst Oliver Roth of Close Brothers Seydler thinks so. He said:
“I believe the markets will stabilise, though they are currently still rather volatile because everyone is rather sceptical. Right now everything is being questioned, the banking systems, the safety nets, everything. But I think that’s greatly exaggerated.”
So far in Europe, there is no end in sight to the equities sell off that started on Monday. European stocks closed lower after a rollercoaster session, though Frankfurt just managed to struggle into positive territory. Even bank shares – which had rallied earlier in the session – ended the day mixed.