ECB creates new repo backstop facility amid ongoing COVID disruption
26 June 2020 Frankfurt
Image: ilolab/Shutterstock.com
The European Central Bank (ECB) has set up a new backstop facility, known as the Eurosystem repo facility for central banks (EUREP), to provide precautionary euro repo lines to central banks outside the euro area.
The facility is the ECB’s latest effort to combat the market instability wrought by the pandemic in Europe and around the globe.
EUREP addresses possible euro liquidity needs in case of market dysfunction resulting from the COVID-19 shock that might adversely impact the smooth transmission of ECB monetary policy.
It will allow a broad set of central banks to borrow euro against euro-denominated debt issued by euro area central governments and supranational institutions.
Under EUREP, the Eurosystem will provide euro liquidity to a broad set of central banks outside the euro area against adequate collateral, consisting of euro-denominated marketable debt securities.
The ECB says the facility will remain in place until June 2021, suggesting that the central bank predicts the markets are not out of the woods yet despite falling COVID-19 cases in much of Europe and an easing of national lockdowns.
EUREP is aimed at complementing the ECB’s bilateral swap and repo lines and reflects the importance of the euro in global financial markets.
The facility is the ECB’s latest effort to combat the market instability wrought by the pandemic in Europe and around the globe.
EUREP addresses possible euro liquidity needs in case of market dysfunction resulting from the COVID-19 shock that might adversely impact the smooth transmission of ECB monetary policy.
It will allow a broad set of central banks to borrow euro against euro-denominated debt issued by euro area central governments and supranational institutions.
Under EUREP, the Eurosystem will provide euro liquidity to a broad set of central banks outside the euro area against adequate collateral, consisting of euro-denominated marketable debt securities.
The ECB says the facility will remain in place until June 2021, suggesting that the central bank predicts the markets are not out of the woods yet despite falling COVID-19 cases in much of Europe and an easing of national lockdowns.
EUREP is aimed at complementing the ECB’s bilateral swap and repo lines and reflects the importance of the euro in global financial markets.
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