European Central Bank (ECB) Chief Economist Philip R. Lane said an expanded euro funding backstop could encourage foreign central banks to hold more euro-denominated bonds, potentially strengthening the currency’s international role.
Speaking at a CF40-Euro50 luncheon in Shanghai on Oct. 21, Lane said in remarks published by the ECB that more than 30 central banks had expressed interest in EUREP over the previous six months. The first foreign central banks completed onboarding in early October, he said.
EUREP, the Eurosystem’s repo facility for central banks, lets central banks outside the euro area borrow euros against high-quality euro-denominated collateral. The ECB set a maximum line of €50 billion per central bank. Transactions have a maturity of one day to one week and may be extended. They are priced at the ECB’s main refinancing operations rate plus a spread. Onboarded central banks can begin drawing funds in the fourth quarter of 2026.
Lane said access to euros on the same day, without selling bonds in the market, could make longer-duration securities more appealing to foreign reserve managers. He pointed to less-liquid euro-area sovereign bonds and eligible supranational bonds as potential beneficiaries. He presented any increase in bond holdings as a possible result of the facility.
The ECB introduced EUREP in 2020. In announcing its expansion in February, the bank cited the risk that euro funding disruptions abroad could affect euro-area markets and interfere with monetary policy. The facility is separate from the ECB’s currency swap lines, which the bank said were unchanged at the time of the expansion.
The expanded framework offers access in principle to central banks outside the euro area, subject to restrictions involving sanctions, money laundering and terrorist financing. The ECB will publish weekly figures for the total daily amount of liquidity supplied through EUREP and its swap lines.
