ECB enhances repo facility for central banks to improve euro liquidity support

The Governing Council of the European Central Bank (ECB) has decided to enhance the Eurosystem repo facility for central banks (EUREP) to make it more flexible and effective in supporting the smooth transmission of euro area monetary policy.

Under EUREP, the Eurosystem provides backstop euro liquidity to non-euro area central banks against high-quality euro-denominated collateral, with appropriate risk mitigants. The updated framework introduces standing access, in principle, for all central banks, unless excluded on grounds such as money laundering, terrorist financing, or international sanctions.

The changes will enable central banks outside the euro area to address euro liquidity shortages swiftly. These updates aim to expand the facility’s geographical reach, increase flexibility, and enhance relevance for global holders of euro securities.

Since its introduction in 2020, the global economic environment has experienced significant shifts related to geopolitics and financial system changes, leading to increased uncertainty and potential volatility. Financial disruptions could affect euro area markets and hinder monetary policy transmission.

Liquidity lines like EUREP support the smooth transmission of monetary policy by mitigating risks of disruptions in euro-denominated funding markets outside the euro area. The facility helps ensure timely, broad, and consistent backstop funding for central banks, especially amid fragmentation and uncertainty.

EUREP complements the ECB’s swap lines, which remain unchanged.

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