ECB to Expand Swap Lines in Push for Stronger Global Euro
The ECB plans to broaden swap lines and has drawn nearly 30 applications for a repo facility as it seeks to widen the euro's international footprint.
The European Central Bank will expand its currency safety nets so that foreign central banks can borrow euros more easily, part of a drive to lift the single currency's standing internationally, ECB President Christine Lagarde said on Monday.
Speaking to European lawmakers, Lagarde said the bank would rework its swap lines — arrangements that provide emergency liquidity in a crisis by letting overseas central banks borrow euros against their own currencies.
"We will be working on swap lines that will be more responsive to the imperative of having a sovereign euro area and a strong euro," she said.
The effort unfolds against concerns about financial fragmentation and uncertainty over the US dollar's future under President Donald Trump. Central bank officials and investors worry the US Federal Reserve could at some point scale back its own swap lines, which act as the main global backstop for trillions of dollars in foreign loans.
Swap lines ease pressure on foreign borrowers while also shielding the euro area from stress originating abroad. The ECB currently has such arrangements with the US Federal Reserve and the central banks of Japan, Britain, Canada and Switzerland.
The move is the latest step in the ECB's broader campaign to widen the euro's international footprint. The bank has received close to 30 applications for a separate lending facility, known as repurchase agreements or repo, that allows foreign banks to borrow against euro-denominated collateral.