The European Central Bank plans to widen its network of currency safety nets, making it easier for foreign central banks to borrow euros. ECB President Christine Lagarde tied the move to concerns over financial fragmentation and growing uncertainty around the US dollar under President Donald Trump.
The European Central Bank plans to expand its currency safety nets, Lagarde said Monday, in a bid to strengthen the euro's global standing. The push comes amid concerns over financial fragmentation and growing uncertainty around the future of the US dollar under Trump.
Lagarde said the ECB would work on swap lines that act as a source of emergency liquidity during a crisis, letting foreign central banks borrow euros in exchange for their own currency. Lagarde told European lawmakers the ECB wants swap lines built for "a sovereign euro area and a strong euro".
These arrangements relieve pressure on foreign borrowers, but they also shield the euro area from stress spilling over from abroad. The ECB already runs such swap lines with the US Federal Reserve and the central banks of Japan, Britain, Canada and Switzerland. The plan builds on an ongoing ECB effort to expand the euro's international footprint.
The ECB has received nearly 30 applications for a separate repo facility that lets foreign banks borrow against euro collateral. Meanwhile, central bank officials and investors worry the Fed might eventually cut its own swap lines, which currently serve as the main global lifeline for trillions of dollars in foreign loans.
Source: Investing.com
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