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Central banks may expand range of collateral

Washington Post – Central banks in the United States, Europe and Japan will consider taking foreign-denominated assets as collateral in an effort to provide liquidity for battered financial markets, the Nikkei newspaper said on Sunday.

Currently most central banks only accept assets denominated in their home currency as collateral, the paper said. If central banks were to accept assets denominated in other currencies, cash-strapped firms would be able to get funds easier, it said.

Six central banks, including the U.S. Federal Reserve, the Bank of Japan, the European Central Bank, and the Bank of England are discussing a potential rule change, the Nikkei said.

The paper did not quote any sources and no one was immediately available at the Bank of Japan for comment, however BOJ Governor Masaaki Shirakawa said earlier this week the move was under consideration.

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