Document Type

Case Study

Case Series

Central Bank Swap Lines


The collapse of Lehman Brothers in September 2008 led to a severe liquidity crisis in Hungary, which is part of the European Union but does not use the euro. Hungary’s banking system was vulnerable to short-term liquidity withdrawals by foreign banks. In October 2008, the Hungarian central bank, Magyar Nemzeti Bank (MNB), created a temporary bilateral repo facility with the European Central Bank (ECB) to access euro liquidity for a maximum of EUR 5 billion in exchange for euro-denominated government securities held by the MNB. The ECB-MNB agreement was designed to increase the MNB’s ability to lend euros to Hungarian markets. The MNB drew on its ECB repo facility for this purpose increasingly from 2008 to 2010; repo usage peaked at EUR 1.8 billion, and the MNB’s downstream facilities provided EUR 4 billion of euro and Swiss franc liquidity in December 2010. The ECB converted half of the MNB’s repo facility into a swap facility in January 2010. A Bank for International Settlements paper said that the announcement of the ECB-MNB repo facility in October 2008 had a calming effect on currency markets. The end date of the original facilities for Hungary was not disclosed. In July 2020, the MNB created a EUR 4 billion repo facility with the ECB as a response to the Covid-19 pandemic. In December 2022, the ECB’s euro-providing facilities with Hungary were extended to January 15, 2024, because of the uncertainties arising from Russia’s invasion of Ukraine.