European Central Bank chief economist Philip Lane argued that international euro liquidity lines can reduce financial spillovers and support monetary-policy transmission. He said enhanced access to the Eurosystem repo facility for central banks, known as EUREP, is available in principle to eligible monetary authorities. Each central bank can receive a maximum line of €50 billion. Drawdowns are due to become available in the fourth quarter after onboarding.
More than 30 central banks have expressed interest in enhanced EUREP access, and the first onboarding was completed at the start of October. The facility allows foreign central banks to borrow euros against adequate collateral. It is designed to address euro liquidity needs outside the currency union without providing an unconditional backstop. Lane delivered the remarks during a speech in China.
LIQUIDITY ACCESS SUPPORTS MONETARY TRANSMISSION
Stress in offshore euro funding markets can tighten financial conditions inside the euro area if foreign institutions sell euro assets or withdraw credit. Central-bank liquidity lines can limit those feedback effects by supplying euros through official channels. Lane said the facilities could therefore mitigate spillovers and reinforce the transmission of ECB policy. Wider access may also support the international use of the currency.
EUREP is based on repurchase transactions and differs from standing swap lines. The ECB retains eligibility, collateral and risk controls, and access is not automatic. Lane said permanent swap lines should be reserved for strong, highly rated jurisdictions with material euro-area links and the capacity to repay euro liabilities. The distinction preserves a higher threshold for unsecured currency exchanges between central banks.
ONBOARDING WILL TEST PRACTICAL DEMAND
The €50 billion ceiling defines the maximum individual facility rather than a guaranteed drawing. Actual use will depend on market conditions, collateral availability and ECB approval. The expressions of interest suggest central banks see value in arranging access before stress emerges. However, unused lines may still serve a precautionary role by reassuring markets that official liquidity channels exist.
The next milestone is the start of drawdown availability during the fourth quarter and disclosure of any participating central banks. Markets will watch whether the facility is used during periods of funding strain and whether it reduces pressure in offshore euro markets. The ECB must balance broader access against credit and operational risks. Lane's speech set out the policy case but did not announce a specific drawdown.