Central banks across the world react to calm down financial markets

Central banks across the world mobilized on Monday to calm down investors on the financial markets, worried of the impact of the Lehman Brothers bankruptcy and the taking over of Merill Lynch, two financial institutions considered too big to go bankrupt, Reuters informs.

The US Federal Reserve was the first institution to react, announcing thins morning that authorities supervise closely the international environment. Moreover, FED took some emergency measures for financial operations by relaxing the conditions under which banks can receive loans from the central bank.

In Europe, the European Central Bank and German, French and British banks reacted as well. ECB undertook an operation on the exchange markets allocating liquidity for banks of 30 billion euro. England’s bank offered 5 billion sterling pounds for the financial system in order to redress.

In Asia, central banks confirmed that authorities monitor the situation closely. The dollar and capital markets in Europe and Asia registered important falls and high level securities raised after talks during the last days did not manage to save the Lehman Brothers bank.

After the Wall Street crisis, FED officials though of reducing the reference quota in their Tuesday session to 1.75% from 2%. The events that lead to this new crisis on the international market were: the bankruptcy of Lehman Brothers bank and the takeover of the Merrill Lynch of the Bank of America. Moreover, American International Group solicited a short term loan of 40 billion dollars to have liquidity.