Euro liquidity lines and the international monetary system
The ECB expanded its Eurosystem repo facility for central banks to enhance global euro liquidity backstops, with operations set to begin in late 2026.
The European Central Bank provides domestic liquidity through refinancing operations and asset portfolios but relies on international liquidity lines to address foreign demand for euros. These lines, including repo and swap arrangements, prevent disruptions in euro funding markets that could impair monetary policy transmission. The ECB notes that recent geopolitical and financial shifts have increased the likelihood of volatile conditions affecting euro area markets.
To strengthen these backstops, the ECB enhanced the Eurosystem repo facility for central banks (EUREP), introducing standing access for eligible central banks. The updated framework allows non-euro area central banks to borrow euro liquidity against high-quality collateral, priced at the main refinancing operations rate plus a spread. The facility will become operational in the fourth quarter of 2026, with a maximum line size of €50 billion per central bank.
EUREP aims to support the global holding of euro-denominated debt securities by foreign central banks, enhancing liquidity in euro area bond markets. The facility encourages investment in longer-duration bonds and broadens access beyond the most liquid sovereign bonds, including supranational issuers like the European Commission. More than thirty central banks have expressed interest, with the first onboarding completed in October.
Swap lines complement EUREP by providing euro liquidity against local-currency collateral, reducing reliance on euro-denominated assets. The ECB restricts swap lines to highly-rated sovereign-backed central banks to mitigate risks, as they entail greater exposure than repo facilities. Both tools are designed to prevent adverse spillovers and maintain monetary policy transmission during crises.