Document Type

Case Study

Case Series

Central Bank Swap Lines


In 2010, Ireland was experiencing a bank crisis and a sovereign debt crisis as a result of fallout from the broader Global Financial Crisis that had begun in 2007. Irish banks were having difficulty raising funds on wholesale funding markets and had borrowed extensively from the European Central Bank (ECB) in euros and US dollars. Despite the Irish government’s guaranteeing the Irish banks and taking other extraordinary actions, analysts and European Union (EU) and United Kingdom officials worried that Irish banks might still default, since the Irish banking sector had significant linkages with the UK and its banking sector. As a result, on December 10, 2010, the ECB and Central Bank of Ireland (CBI) entered into a bilateral, unidirectional swap arrangement pursuant to which the CBI could request pounds sterling (GBP) in exchange for euros. A week later, the ECB and the Bank of England (BoE) entered into a bilateral, unidirectional swap agreement pursuant to which the BoE would provide up to GBP 10 billion (USD 15.6 billion) to the ECB in exchange for euros to address any liquidity constraints. Under the terms of the BoE-ECB swap, the ECB could then provide the drawn pounds sterling to the CBI, which could lend the funds to banks in its jurisdiction. The EU and International Monetary Fund also provided a EUR 85 billion (USD 113 billion) aid package to Ireland. The ECB-CBI agreement was extended once and terminated on September 28, 2012. The BoE-ECB agreement was extended three times and expired on September 30, 2014; the CBI reported that one bank utilized the facility in 2010.