Central bank liquidity lines
Liquidity lines between central banks are well-established instruments in the central banking policy toolkit, aimed at alleviating tensions in international funding markets. They are agreements that enable central banks to receive currencies issued by other central banks in exchange for some form of collateral based on predefined terms. Two basic types of financial instrument can be used to establish a liquidity line: swap agreements and repurchase agreements – often referred to as “repo agreements”.
The swap and repo lines have been used increasingly by the ECB and other major central banks since the 2008-09 global financial crisis. The ECB is part of a swap-line network of standing bilateral arrangements with five other major central banks (the Bank of Canada, the Bank of Japan, the Swiss National Bank, the Bank of England and the Federal Reserve System).
In response to the coronavirus (COVID-19) crisis, the ECB swiftly reactivated existing swap lines with a number of central banks and also set up new ones. It also set up new, temporary, bilateral repo lines with several non-euro area central banks, including under the Eurosystem repo facility for central banks (EUREP).
Currency swap agreements
Currency swap agreements between two central banks are arrangements where the borrowing central bank obtains the currency of another in exchange for its own currency, which is provided as collateral. Both central banks agree to reverse the transaction and repay the borrowed currency, plus a contractually agreed interest rate, on a specified date.
Many of the ECB’s swap agreements are reciprocal. This means that the ECB is able to (i) provide euro to a central bank while receiving foreign currency as collateral, and (ii) receive foreign currency from the issuing central bank while providing euro as collateral, whichever of the two is necessary in given circumstances. However, some ECB swap agreements only envisage the ECB providing euro to another central bank in exchange for foreign currency, issued by the requesting central bank, pledged as collateral with the ECB.
Repurchase (repo) agreements are arrangements where the borrowing central bank obtains foreign currency for a specified period and at a contractually agreed interest rate, in exchange for financial assets denominated in the same currency that serve as collateral for the lending central bank.
Under its repo agreements, the ECB provides euro to non-euro area central banks and receives euro-denominated financial assets as collateral.
What is the purpose of swap and repo lines?
The Eurosystem’s swap and repo lines are monetary policy instruments. They help prevent tensions in international funding markets from hampering the effectiveness of euro area monetary policy transmission.
When the ECB provides euro to non-euro area central banks, the liquidity lines address possible euro liquidity needs in non-euro area countries in the event of market dysfunctions. They can prevent spillback effects on euro area financial markets and economies that might otherwise have an adverse impact on the smooth transmission of the ECB’s monetary policy. The lines also help prevent euro liquidity shortages from turning into financial stability risks.
When the ECB receives foreign currency from another central bank (for example US dollars from the Federal Reserve System) and provides euro as collateral, the liquidity lines ensure that funds in the foreign currency are continuously available to euro area banks. This prevents tensions in international funding markets from potentially impairing access to foreign currency or increasing its funding costs, which may lead to abrupt deleveraging by euro area banks, extreme price movements and interruptions in the flow of credit.
ECB main framework and temporary Eurosystem repo facility for central banks
The ECB’s main framework sets out strict criteria to be used when deciding whether to grant swap and repo lines to non-euro area central banks. The framework encompasses bilateral swap and repo lines and is applicable until 15 January 2024. The ECB’s Governing Council assesses incoming requests for liquidity lines on a case-by-case basis.
Some ECB swap agreements are standing agreements with no end date, although the parties are able to terminate them at any time. Other arrangements have a predefined end date but can be prolonged by mutual agreement.
Complementing its main framework, in June 2020 the ECB established a temporary Eurosystem repo facility for central banks (EUREP). EUREP aims to broaden access, beyond the swap and repo lines already established under the ECB’s main framework, to the Eurosystem’s liquidity arrangements for a range of central banks around the world.
EUREP was designed originally for use as a temporary, precautionary facility to address euro liquidity needs outside the euro area in the context of the coronavirus shock. It is now being used in the context of Russia’s invasion of Ukraine and the ongoing war. It is playing an important role in addressing the uncertain environment caused by the war and the risk of spillovers that could adversely affect euro area financial markets.
Updated framework for euro liquidity lines
The ECB introduced an updated framework for liquidity lines, effective as of 16 January 2024. This updated framework retains the objectives and purpose of liquidity lines while integrating the original main framework and EUREP into a single unified framework for the provision of euro liquidity to non-euro area central banks.
Swap lines will be available to countries of highest creditworthiness or systemic importance from a euro area perspective. All repo lines will become available under uniform conditions as part of a common, permanent EUREP framework. Access to a euro liquidity line might differ in normal times from periods of acute, broad-based financial market distress, when the establishment of precautionary lines with a broader set of countries could be warranted.
The Governing Council will continue to assess requests for liquidity lines on a case-by-case basis.
As of 16 January 2024, all euro liquidity lines will be listed. Each listing will include the name of the non-euro area central bank, the type of line, the maximum borrowable amount in euro, the duration of the agreement and whether it is reciprocal.
List of central bank liquidity lines that the Eurosystem maintains under its main framework for swap and repo lines (as at September 2023)*
|Non-euro area counterpart||Type of arrangement||
Maximum borrowable amount (EUR millions)
|Danmarks Nationalbank||Swap line||24,000||Standing||No|
|Sveriges Riksbank||Swap line||10,000||Standing||No|
|Bank of Canada||Swap line||Unlimited||Standing||Yes|
|People’s Bank of China**||Swap line||45,000||08 October 2025||Yes|
|Bank of Japan||Swap line||Unlimited||Standing||Yes|
|Swiss National Bank||Swap line||Unlimited||Standing||Yes|
|Bank of England||Swap line||Unlimited||Standing||Yes|
|Federal Reserve System||Swap line||Unlimited||Standing||Yes|
|Narodowy Bank Polski||Swap line||10,000||15 January 2024||No|
|Magyar Nemzeti Bank||Repo line||4,000||15 January 2024||No|
|Banca Naţională a României||Repo line||4,500||15 January 2024||No|
|Bank of Albania||Repo line||400||15 January 2024||No|
|Andorran Financial Authority||Repo line||35||15 January 2024||No|
|National Bank of the Republic of North Macedonia||Repo line||400||15 January 2024||No|
|Central Bank of the Republic of San Marino||Repo line||100||15 January 2024||No|
|* The table does not include repo lines established with non-euro area central banks under the current EUREP framework, for which the ECB does not disclose its counterparties. As of 16 January 2024, the main framework and EUREP will be replaced by one unified framework for the provision of euro liquidity to non-euro area central banks; as of this date, all counterparties of ECB liquidity lines will be disclosed.
** Maximum borrowable amount is set to CNY 350 billion when CNY is provided to the ECB.
The dataset below is published weekly. It provides information on the aggregate daily amount of liquidity provided across all central bank liquidity lines, denominated in euro, as of January 2020.
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