FRANKFURT - EUROPE'S major central banks moved quickly to calm markets on Monday, pumping billions of euros and pounds into the financial system in the aftermath of Lehman Brothers Holdings Inc.'s bankruptcy filing.
The European Central Bank said it received 51 bids for 90.3 billion euro (S$182 billion) on its one-day tender with a bid rate of 4.25 percent, a clear sign that demand for cash is over the top.
ECB President Jean-Claude Trichet, speaking at an awards ceremony in Frankfurt, declined to comment on Lehman Brothers, but the bank, which oversees monetary policy for the 15 countries that use the euro, said in a brief statement that it continued 'to closely monitor the conditions in the euro area money market. The ECB stands ready to contribute to orderly conditions in the euro money market.'
Similarly, the Bank of England in London offered up 5 billion pounds (S$12.8 billion) in a three-day auction that drew bids for 24.1 billion pounds, or nearly five times the amount that was offered.
The Zurich-based Swiss National Bank said it was also providing liquidity in 'a generous and flexible manner' at an overnight rate of 1.9 per cent, but wouldn't say how much was on offer.
Global stock and credit markets have been roiled by the decision, which came after last ditch talks to find a suitor for the Wall Street institution collapsed this weekend. The 158-year-old Lehman was crippled by US$60 billion in soured real-estate holdings and unable to find an investment partner to throw it a lifeline.
On Sunday, a global consortium of banks, working with government officials in New York, announced a US$70 billion pool of funds to lend to troubled financial companies with the aim of preventing a worldwide panic on stock and other financial exchanges.
Ten banks - Bank of America, Barclays, Citibank, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Merrill Lynch, Morgan Stanley and UBS - each agreed to provide US$7 billion.
The US Federal Reserve also chipped in with more ready cash through its emergency lending program for investment banks. The central bank announced late Sunday that it was broadening the types of collateral that financial institutions can use to obtain loans from the Fed.
