Yesterday we decided to create a Eurosystem repo facility to provide liquidity in € to central banks outside the euro area: EUREP = Eurosystem repo facility for central banks. This is a precautionary measure to alleviate potential € funding difficulties due to the pandemic. 1/5
Repo lines protect and support monetary transmission in times of market distress, e.g. by preventing fire sales of €-denominated assets by banks in need of € liquidity. Importantly, such facilities have a stabilising effect even if they are not used. 2/5
EUREP complements existing bilateral swap/repo lines, e.g. in the swap line network (with the Fed, Bank of England, Bank of Canada, Bank of Japan, Swiss National Bank), and new swap lines to the Croatian & Bulgarian central banks or repo line to the Romanian central bank. 3/5
EUREP goes beyond the countries eligible for the @ecb’s bilateral repo/swap lines. It acts as a backstop facility, reflected in pricing that discourages the use in calm times. € are provided only against adequate collateral in € (euro area sovereign bonds & supranationals). 4/5
Decisions on the access to EUREP are taken on a case-by-case basis. The new facility will be available until June 2021 but could be extended if needed. The creation of a broad liquidity facility by the Eurosystem reflects the importance of the € in global financial markets. 5/5
