ECB launched a mechanism to strengthen the international role of the euro

The European Central Bank (ECB) has just announced a plan to expand access to the “repo line” for central banks around the world, turning this tool into a permanent mechanism and applicable globally.

The “repo line” is used in times of stress, when central banks cannot raise capital in the market. This allows them to borrow euros from the ECB by mortgaging high-quality assets and repaying them at maturity with interest.

Unlike previous mechanisms that had to be periodically renewed, the new mechanism provides permanent access to repo transactions with a limit of up to 50 billion euros. The “repo line” will take effect from the third quarter of 2026, provided that the borrowing partner is not excluded for reputational reasons such as money laundering, terrorist financing or violation of international sanctions.

This mechanism was previously limited to a small number of countries, mainly in Eastern Europe. However, ECB President Christine Lagarde has long seen it as a tool to help expand the euro’s world influence. Because ensuring access to euros is expected to help increase demand for euro-denominated assets. At the same time, encourage banks outside the 21-country region using the European common currency to buy assets from this bloc.

“Having a ‘lender of last resort’ for central banks globally will increase confidence in investing, borrowing and trading in euros. This ensures that liquidity will always be available when markets are volatile,” she said.

In addition, in the context of investors reassessing the position of the USD due to the unpredictability of US President Donald Trump’s economic policies, Ms. Lagarde believes that this is the right time for the euro to increase its market share.

Currently, the US Federal Reserve (Fed) also maintains a tool similar to the ECB’s “repo line”. It is called FIMA Repo Facility, with the basic goal of protecting the US Treasury bond market. Accordingly, when organizations urgently need USD, they can use this mechanism to borrow USD by mortgaging US Treasury bonds, instead of selling them off. At maturity, the borrower returns the USD with interest and receives the bond back.