The Central Bank of Iceland has completed the onboarding process for the Eurosystem Repo Facility for Central Banks, EUREP. The facility provides the Bank with an additional source of temporary euro liquidity and strengthens the resilience and flexibility of its foreign exchange reserve management.
Access to EUREP means that the Central Bank of Iceland can borrow euros by pledging eligible euro denominated securities as collateral. The facility strengthens the Bank’s financial crisis preparedness by providing an additional tool that enables the rapid and flexible provision of liquidity with minimal counterparty risk, thereby strengthening the economy’s resilience to respond to financial shocks.
The European Central Bank (ECB) has made EUREP a standing facility that enables central banks outside the euro area to access euros against eligible, high-quality euro-denominated securities. The aim is to address the risks of euro funding pressures abroad by ensuring the timely, consistent and broad provision of backstop funding to foreign central banks. As a liquidity backstop, it also helps to support the smooth functioning of financial markets. The maximum borrowable amount for non-euro area central banks is EUR 50 billion, with actual borrowing availability subject to availability and value of eligible collateral.
The agreement also further strengthens the cooperation between the Central Bank of Iceland and the Eurosystem. The ECB published press releases titled ECB enhances repo facility for central banks and ECB to start implementing enhanced repo facility for central banks.