European Central Bank ( ECB ) president Christine Lagarde expects that the bank’s enhanced Eurosystem repo facility – known as EUREP – for central banks outside the eurozone to reinforce the global role of the euro.

Set up in 2020, EUREP provides euro liquidity to non-euro area central banks against high-quality euro-denominated collateral.

The updated framework announced on February 14, the ECB says, “will enable central banks in jurisdictions outside the euro area to address risks of euro liquidity shortages swiftly. These changes aim to make the facility more flexible, broader in terms of its geographical reach and more relevant for global holders of euro securities.”

Lagarde, speaking at the Munich Security Conference on the same day, notes: “The ECB needs to be prepared for a more volatile environment. As industrial policy becomes more assertive, geopolitical tensions rise and supply chains are disrupted, financial market stress is likely to become more frequent.

“We must avoid a situation where that stress triggers fire sales of euro-denominated securities in global funding markets, which could hamper the transmission of our monetary policy. And this means we have to give partners who want to transact in euros the confidence that euro liquidity will be available if they need it.”

The updated EUREP, Lagarde points out, is expected to provide permanence, extend scope and ensure agility for euro liquidity. “Central banks outside the euro area,”  she adds,  “can now rely on continuous access to liquidity in euros, not just temporary lines.

“We move from a regional to a global perimeter. Any central bank that meets basic criteria can request access, with flexibility on usage. [At the same time,] “access is granted by default unless there is a reason to restrict it, speeding up the provision of liquidity.

“This facility also reinforces the role of the euro. The availability of a lender of last resort for central banks worldwide boosts confidence to invest, borrow and trade in euros, knowing that access will be there during market disruptions.

“In a world where supply-chain dependencies have become security vulnerabilities, Europe must be a source of stability – for ourselves and for our partners. That, too, is part of European security. And that is how the ECB plays its part.”