ECB extends liquidity lines with non-EUR central banks

The decision includes ECB’s temporary swap line with Poland as well as its temporary repo lines with the central banks of Albania, Andorra, Hungary, North Macedonia, Romania, and San Marino. The size and operational parameters of the individual agreements will reportedly remain unchanged, according to the press release.

The swap and repo lines were due to expire on 15 January 2023 and are now extended until 15 January 2024. The ECB points to the persistent uncertainty stemming from Russia’s ongoing war in Ukraine and the associated economic and financial repercussions on the global economy and financial markets as the reasons behind the liquidity lines. They are designed to prevent ‘spillover’ effects in EUR area financial markets and economies and safeguard the smooth transmission of the ECB’s monetary policy, the press release states.

These bilateral swap and repo lines have been established since 2020 to provide EUR liquidity to financial institutions via non-EUR area central banks in view of the pandemic and heightened geopolitical tensions triggered by Russia’s invasion of Ukraine. These temporary agreements complement the ECB’s standing swap lines and EUREP repo agreements. The EUREP facility was extended to 15 January 2024 as part of the ECB’s decisions communicated on 2 December 2022.

Under a repo line, a non-EUR area central bank can borrow EUR up to the specified limit in exchange for adequate EUR-denominated collateral. Under a swap line, a non-EUR area central bank can borrow EUR up to the specified limit in exchange for its own currency, which is provided as collateral.

More about ECB

At the start of December 2022, the ECB partnered with European University Institute to deliver specialised training for all European banking supervisors, according to an official press release. At the end of November, the president of the European Central Bank called for the regulation and supervision of the crypto sector in the EU in the wake of FTX’s downfall.

Earlier, the ECB announced that it became a member of Gaia-X, a non-profit association advocating digital sovereignty for Europe. In October 2022, the ECB decided to recalibrate the conditions of the third series of targeted longer-term refinancing operations (TLTRO III) as part of the monetary policy measures adopted to restore price stability over the medium term. Shortly before, the ECB announced that the launch of new real-time gross settlement system and T2 are rescheduled from 21 November 2022 to 20 March 2023.

Also in October, the ECB and the People’s Bank of China (PBC) have decided to extend their bilateral euro-renminbi currency swap arrangement for another three years until 8 October 2025. The ECB also has plans to propose legislation for the digital euro, which is to be introduced as a CBDC issued by ECB in 2023. For this, the European Central Bank chose paytechs Nexi and Worldline to develop a front-end prototype for making payments with digital euros.