Central banks around the world primary on Wednesday (27/1/2010) local time said it would stop the U.S. dollar emergency loan made during the financial crisis, reflecting growing confidence in the financial system back to health.

The decision, announced in coordinated statements is an important milestone in the global financial crisis and marked the first integrated revocation of extraordinary support from central banks to financial markets.

The European Central Bank (European Central Bank), Bank of England (UK Central Bank), Bank of Japan (Bank of Japan), Swiss National Bank (Central Bank of Switzerland), and the central banks of Canada, Australia, Brazil, and Sweden said they would let the U.S. dollar swap arrangements with the Federal Reserve ended on February 1.

Demand for dollar swap through the Federal Reserve, gave billions of dollars to finance companies through banks abroad, foreign central banks, has fallen dramatically due to market conditions improved throughout the world. “These channels, which was founded to counter the global financial market pressures, no longer necessary given the improvements seen in the functioning of financial markets last year,” declared the European Central Bank.

“Central banks will continue to work together as needed.”

Statement of central banks to coincide with the Fed’s policy statement following the closing of a two-day meeting in January where it says swap will end as planned on February 1.

Fed’s policy setting panel opens swap lines with the European Central Bank and Swiss National Bank in December 2007. When the financial crisis worsened, the Fed also set the swap lines with central banks from Japan, British, Canadian, Australian, Swedish, Norwegian, Danish, Brazil, Mexico, South Korea, and Singapore to ease U.S. dollar funding shortages.

With confidence in the financial markets in short supply at the peak of the crisis, short-term money markets froze. Many banks and foreign investors who rely on money markets to borrow U.S. dollars to fund the U.S. assets they find themselves short of dollars needed to finance the ownership.

Through the currency swap, the U.S. Fed to offer dollars to banks, foreign central banks in exchange for their currencies. Central banks and foreign banks lend dollars to the domestic market, which allows the company access to dollars at a time when the normal financing channels have been closed.