Faced with the risk of economic contagion from the Russian invasion of Ukraine, the European Central Bank (ECB) announced on Monday 28 March that it had concluded new agreements with the central banks of five European countries outside the euro area - Poland, Hungary, Albania, North Macedonia and San Marino - until mid-January 2023, which will enable it to provide liquidity to the national banking systems in the event of financial turbulence.
The ECB and Narodowy Bank Polski have agreed to establish a precautionary ‘swap line’ to provide euro liquidity to financial institutions in Poland. Under the agreement, the National Bank of Poland could borrow up to €10 billion in exchange for zloty.
The Frankfurt-based institute has extended, until mid-January 2023, the bilateral liquidity provision agreements (‘repo lines’) established in 2020 with the following four central banks to combat the financial consequences of the pandemic and which are due to expire in March 2022: - the Hungarian National Bank for up to €4 billion; - the Bank of Albania for up to €400 million; - the National Bank of the Republic of North Macedonia for up to €400 million; - the Bank of the Republic of San Marino for up to €100 million.
“In the context of heightened geopolitical tensions triggered by the Russian invasion of Ukraine, the lines are designed to prevent spillover effects in euro area financial markets and economies that might adversely affect the smooth transmission of the ECB’s monetary policy”, the ECB said in a statement. It has also demanded that the counterparts to these agreements comply with the sanctions that the European Union has imposed on Russia in response to its armed aggression so that the lines are not used to circumvent these sanctions. (Original version in French by Mathieu Bion)