In the context of geopolitical turmoil and loose alliance ties, the European Central Bank is opening its euro "lifeline" to almost all countries in order to enhance the global status of the single currency. The European Central Bank said on Saturday that "all central banks" outside the euro zone can in principle borrow euros from the ECB using euro zone-denominated assets as collateral.
The move is aimed at making it easier for central banks to obtain euro financing during times of financial stress. This is the latest link in the European strategy, which aims to win over economic, trade and political allies and gain a foothold in the competition.
The move is in line with the broader plan of European Central Bank President Christine Lagarde: She calls this a "global moment" for the euro, and uncertainty about U.S. economic policy has once again raised questions about the dollar's long-term dominance.
The following is the revised version of the European Central BankEurep toolsMainly, the tool will be officially launched in July.
What is Eurep?
Eurep stands forEurosystem central bank repo facility, established during the 2020 epidemic. Participating central banks can borrow euros from the ECB using high-quality euro-denominated collateral.
This type of repo facility can enhance a country's ability to withstand tight foreign exchange liquidity and is crucial to stabilizing its banking system.
Which central banks can use Eurep?
All foreign central banks can join the expanded facility;
Exceptions include countries subject to international sanctions and central banks involved in money laundering or terrorist financing. Previously, Eurep was only open to eight countries surrounding the EU.
The governors of national central banks may submit a formal application to the president of the European Central Bank to obtainStanding access rights.
How much can be borrowed?
According to the new terms, central banks of various countries can borrow up to50 billion euros(approximately $59.34 billion), with collateral including euro area government bonds with good credit ratings.
The new limit is significantly higher than the current cap. As an emergency tool, usage of this repurchase line has been low recently.
Why did the ECB expand Eurep?
Encourage overseas institutions to lend, trade and invest more in euros;
Improve the status of the euro on the international stage (currently the euro is far behind the US dollar, ranking second);
Help the euro zone isolate the transmission of overseas market pressures.
How does Eurep actually work?
The repurchase operations will be carried out by some of the 21 national central banks in the euro system. The ECB has not disclosed the specific list.
After foreign central banks obtain fundsUnrestricted use, which was previously only used for lending to domestic banks.
Will we know which central banks have used Eurep?
Won't.
The ECB will no longer publish usage data for individual countries and will only disclose the overall weekly euro liquidity withdrawals of all repo facilities.