The Bank of Canada is joining the U.S. Federal Reserve and central banks in Europe and Japan to shovel up to a quarter of a trillion dollars into global money markets as they strive to restore confidence in the world's battered financial system.

In a statement issued at 3 a.m. ET, the Bank of Canada said it is acting with the Bank of England, the European Central Bank (ECB), the Federal Reserve, the Bank of Japan and the Swiss National Bank with "co-ordinated measures designed to address the continued elevated pressures in U.S.-dollar short-term funding markets."

In particular, the Bank of Canada and the Federal Reserve have established a $10-billion US reciprocal currency arrangement to provide U.S.-dollar liquidity in Canada.

This could be drawn on by the Bank of Canada to assist any Canadian financial institutions that run short of ready cash.

"The bank judges that it is not necessary for it to draw on this swap facility at this time, but that it is prudent to have the agreement in place," the statement said.

"The Bank of Canada continues to closely monitor global market developments and remains committed to providing liquidity as required to support the stability of the Canadian financial system and the functioning of financial markets."

The central banks "continue to work together closely and will take appropriate steps to address the ongoing pressures," it added, echoing statements by the other central banks.

Credit market pressures have intensified since Monday after the weekend collapse of Lehman Brothers Holdings Inc., and central banks have already injected billions of dollars this week in an effort to keep banks from hoarding cash.

The Fed said it has authorized swap lines similar to the Canadian arrangement totalling $247 billion US: $110 billion US with the ECB, $60 billion US with the Bank of Japan, $40 billion US with the Bank of England and $27 million US with the Swiss National Bank.

This represents a $180-billion US expansion of the swap facilities the Fed previously had in place with the other central banks.

The ECB, which oversees monetary policy in the 15 countries using the euro, said in a statement similar to that of the Bank of Canada that the "measures, together with other actions taken in the last few days by individual central banks, are designed to improve the liquidity conditions in global financial markets."

The Federal Reserve has pumped $70 billion US into the American financial system, and the U.S. Treasury Department said Wednesday that to help the Fed cope with unprecedented borrowing needs it will begin auctioning debt for the central bank.