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Document Type

Case Study

Case Series

Central Bank Swap Lines

Abstract

At the outset of the novel coronavirus pandemic (COVID-19), financial instability spread around the world. In response to potential euro funding stresses outside the euro area, on June 25, 2020, the European Central Bank (ECB) announced the Eurosystem Repo Facility for Central Banks (EUREP). The ECB introduced the facility as a precautionary backstop to address potential COVID-19-related euro liquidity funding stresses and to complement its existing network of swap lines and bilateral repo lines for central banks outside the euro area. Central banks could apply to use EUREP to borrow euros against euro-denominated sovereign debt (debt issued by euro-area governments or supranational institutions). The ECB initially said that EUREP would expire at the end of June 2021, but it later renewed the facility until January 15, 2024, on the basis that the facility was still needed for monetary policy purposes. In 2020, the Central Bank of Kosovo announced that it had signed a repo agreement under the facility for EUR 100 million. In 2022, the Central Bank of Montenegro announced that it had also gained access to the facility for EUR 250 million. Neither country has said publicly whether it ever drew on those lines. As of January 17, 2023, the ECB said that EUREP was in use as a result of the war in Ukraine.

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