More than 30 central banks expressed interest in the European Central Bank's expanded euro lending facility over six months, according to remarks published on Oct. 21 by the Bank for International Settlements.
The updated facility opens standing access in principle to central banks worldwide, the remarks said. The BIS published “Euro liquidity lines and the international monetary system” in its central bankers' speeches series, with liquidity lines referring to arrangements that give central banks access to cash.
The ECB completed admission of the first foreign central banks at the beginning of October, the speech said. Central banks that complete the process can borrow from the facility from the fourth quarter of 2026, it said.
The Eurosystem repo, or securities-backed lending, facility for central banks provides loans against high-quality euro-denominated securities, with a maximum of 50 billion euros for each central bank, the speech said. Individual loans run from one day to one week and can be extended, it said.
Borrowers pay the ECB's main refinancing rate plus an additional charge set by its Governing Council, the speech said. That pricing is intended to keep borrowing for periods of financial strain, it said.
The speech examined how euro lending arrangements support the ECB's ability to influence borrowing costs and economic activity beyond its direct domestic lending. It drew on earlier empirical studies, including research from 2021 and 2022, rather than presenting a newly measured effect over a specified period.
Existing evidence indicates that the ECB's international lending arrangements reduced strains in euro funding markets, the speech said. Their availability can help prevent financial disruption even when central banks do not borrow, it said.
The expanded facility could encourage foreign central banks to hold more euro-denominated bonds, including longer-term securities, because they can obtain cash against them, the speech said. It could also support bonds that trade less readily, including European Commission debt, it said.
The requirement to provide euro securities limits the facility's reach, the speech said. Countries can have large euro debts without holding enough eligible assets, it said.
Currency swap lines, arrangements that exchange currencies between central banks, can fill that gap because they accept local currency instead, the speech said. Access to swaps is associated with stronger cross-border bank lending, while secured lending arrangements are more closely associated with securities holdings, it said.
Swaps carry greater risks and should go only to central banks capable of repaying, backed by highly rated governments, the speech said. They also require checks to limit excessive reliance on central bank support, it said.
Wider access to euros could support the currency's use in trade and borrowing, strengthening the reach of ECB policy, the speech said. The speaker said the views were personal and did not represent the Governing Council's collective position.
