FRANKFURT - THE European Central Bank said on Monday it would lend 10.6 billion euros' (S$20.37 billion) worth of Swiss francs to eurozone banks as part of its effort to get interbank lending markets moving.

The loans would take the form of currency swaps, with the ECB buying euros and selling francs at the rate of 1.4345 francs/euro on Wednesday before reversing the operation one week later at a rate of 1.433803, a statement said.

The difference of 0.000687 francs per euro, or 6.97 swap points, is the fee banks will pay for access to the Swiss currency, which they need to underpin lending operations.

The ECB had planned to make up to 20 billion euros' worth of francs available however, so requests for a total of 10.590 billion euros' worth of francs indicated tension was not too severe in this segment of the money market.

Central banks are fulfilling much of the role normally filled by commercial banks through the interbank markets by providing unlimited amounts of liquidity, or central bank cash, to ensure banks can meet minimum reserve requirements which underpin lending to the economy at large.

Money markets determine the availability of credit for vast numbers of people around the globe, from managers trying to fund their businesses to families and students seeking mortgages and personal loans. -- AFP