More than 30 central banks have expressed interest in the European Central Bank’s expanded euro lending facility over six months, according to a speech published on Oct. 21 by the Bank for International Settlements.
The facility opens standing access, in principle, to central banks worldwide. The ECB completed the admission of the first foreign central banks at the start of October, and those that finish the process can borrow from the fourth quarter of 2026.
The Eurosystem lends to those central banks against high-quality euro-denominated securities they put up as collateral, up to 50 billion euros each. Individual loans run from one day to one week and can be extended.
Borrowers pay the ECB’s main refinancing rate plus a charge set by its Governing Council. The pricing is meant to keep the facility for periods of financial strain rather than routine funding.
The speech, “Euro liquidity lines and the international monetary system”, drew on earlier research from 2021 and 2022 rather than presenting a newly measured effect.
That evidence indicates the ECB’s international lending arrangements reduced strains in euro funding markets. Their availability can prevent disruption even when central banks never draw on them.
The expanded facility could encourage foreign central banks to hold more euro-denominated bonds, including longer-dated and less readily traded issues such as European Commission debt, because they can raise cash against them.
Its reach is limited by the requirement to post euro securities. A country can carry large euro debts without holding enough eligible assets.
Currency swap lines, under which central banks exchange their own currencies with each other, can fill that gap because they accept local currency instead. Access to swaps is associated with stronger cross-border bank lending, while secured lending is more closely associated with securities holdings.
Swaps carry greater risk and should go only to central banks able to repay, backed by highly rated governments. They also require safeguards against excessive reliance on central bank support.
Wider access to euros could support the currency’s use in trade and borrowing, extending the reach of ECB policy. The views were described as personal and not the Governing Council’s collective position.
