ECB opens enhanced euro liquidity facility to foreign central banks

The European Central Bank is widening access to emergency euro funding for foreign central banks, with the first institutions joining its enhanced repo facility in October and eligible banks able to draw funds from the fourth quarter of 2026.

ECB Executive Board member Philip Lane said the changes to the Eurosystem repo facility for central banks (EUREP) would make it more flexible and broaden its reach. More than 30 central banks have expressed interest in the past six months, he said in a speech in Shanghai on 21 October. [1]

Under EUREP, foreign central banks can borrow euros against high-quality, euro-denominated collateral. The updated framework offers standing access in principle to all central banks, except those excluded for reasons including money laundering, terrorist financing or international sanctions. Each institution can access a line of up to €50 billion, with loans priced at the ECB’s main refinancing rate plus a spread. Transactions can run from one day to a week and may be extended.

Lane said the facility is intended as a crisis backstop, not routine funding. Its availability could help contain shortages of euros abroad and reduce the risk that strains spill into euro-area money markets, securities markets or banks, complicating the ECB’s monetary policy. He cited research suggesting the ECB’s liquidity lines have helped ease pressure on euro funding markets. [1]

EUREP provides liquidity against euro-denominated collateral, while central-bank swap lines can provide euros against local-currency collateral. Lane said the two tools are complementary: EUREP can support global markets for euro-denominated securities, while swap lines can channel funds through foreign central banks to domestic banks. He argued that swap lines carry greater risks and should be limited to jurisdictions whose central banks can repay and where financial disruption could threaten monetary policy transmission in the euro area. [1]

Lane also said liquidity backstops can encourage international use of the euro and support demand for euro-denominated debt. He cautioned that any growth in such borrowing needs monitoring, particularly if short-term euro liabilities increase vulnerability to funding-market disruption. [1]

The speech sets out Lane’s views; it says they should not be taken as the collective position of the ECB Governing Council. [1]