The European Central Bank offered $40 billion to banks to soothe credit markets after the failure of Lehman Brothers Holdings.
The ECB said bids for the three-day loan must be submitted by 9.45am in Frankfurt. The auction result will be announced at 11.45am, the central bank said.
The US Federal Reserve yesterday more than doubled the combined amount of dollars that the ECB and the Swiss central bank can auction to $137 billion and authorized $110 billion in new so-called swap lines with central banks in Japan, the UK and Canada.
Central banks are responding to the worst financial crisis since the 1929 Wall Street crash.
"These measures provide some breathing room, but ultimately banks remain dependent on central banks,'' said Rainer Guntermann, an economist at Dresdner Kleinwort in Frankfurt. "It's a difficult environment at the moment."
The joint action is the latest attempt by central bankers to fight the financial crisis which deepened this week after Lehman and American International Group Inc. tumbled and Merrill Lynch & Co. was sold.
The crisis began over a year ago after the US housing market imploded and has pushed the world economy to the brink of a recession. Yesterday marked the first time the ECB auctioned dollars overnight since swap lines were opened with the Fed last December.
The ECB said it would offer the dollars "for as long as needed." It will also increase by $5 billion the amount it lends for 28 days and 84 days to $25 billion and $15 billion respectively.
Bloomberg