Temporary Funding Needs

The ECB said Saturday that under the new Eurosystem repo facility for central banks, or EUREP, it will no longer publish information about which central banks have accessed its repo lines. Instead, it will provide details of overall weekly drawings of euro liquidity across all repo lines.

“There are no ex ante restrictions on how non-euro area central banks can use funds borrowed under the revised EUREP, as opposed to the previous EUREP facility, which was reserved for lending by non-euro central banks to their domestic financial institutions,” the ECB said. “In view of the increased geographical scope, central banks worldwide can use the euro liquidity provided under EUREP to address a wider range of temporary funding needs.”

In a speech about Europe’s monetary sovereignty, Executive Board member Piero Cipollone said Thursday that the ECB’s liquidity facilities address the risk of disruptions in euro-denominated funding markets outside the region, thereby preventing turmoil in global markets to lead to “strong adverse effects” on euro-area financing conditions.

Repo lines offer access to euros for specified periods in exchange for high-quality euro-denominated financial assets as collateral. They’re different from swap lines, under which the ECB exchanges money with major peers including the Federal Reserve, the Bank of England and the Bank of Japan.

Both arrangements help address — and prevent — market dysfunctions that can spill into the euro area, push up interest rates and impair the way the ECB’s monetary policy affects the economy.

The ECB created EUREP during the Covid-19 pandemic and currently has repo lines with the central banks of Romania, Hungary, Albania, Andorra, North Macedonia, San Marino, Montenegro and Kosovo.

South Africa’s central-bank chief Lesetja Kganyago has already said that the G-20 country would be keen to utilize new ECB repo lines if available, given the vast amount of trade and investment that comes from Europe, according to Reuters.

The ECB can also count on the backing of European policymakers.

In a paper prepared for Monday’s meeting of the euro-area finance chiefs and seen by Bloomberg, the European Commission called for reinforcing euro diplomacy by reassuring partner countries about access to euro liquidity.

Meanwhile, the European Parliament this week stated in its resolution on the ECB’s annual report 2025 that it “supports the ECB in its efforts to accommodate the international role of the euro through, inter alia, sufficient currency swap and repo lines.”

–With assistance from Monique Vanek.

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