TOKYO (Reuters) - 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.
“Regarding cross-border collateral, as I have said before in a number of speeches, it is an issue being considered among central banks and the BOJ is also part of this and is considering it,” Shirakawa told a news conference on Wednesday.
In Japan, foreign financial companies have been unable to fully access the offered liquidity because their yen-denominated assets are limited, Nikkei said.
Overseas investors, including hedge funds, hold only 7 percent of outstanding Japanese government bonds, it said.
Some central banks, including the Bank of England, do accept some foreign-denominated assets as collateral, but the discussions are aimed at widening that, the paper said.
The world’s top central banks joined forces on Thursday to throw a multibillion-dollar lifeline to global markets in a push to free up bank-to-bank lending frozen by upheavals on Wall Street.
(Additional reporting by Yoko Nishikawa)
Reporting by David Dolan; Editing by Tomasz Janowski