European Central Bank and National Bank of Serbia set up repo line to provide euro liquidity

The European Central Bank (ECB) positively responded to the National Bank of Serbia’s (NBS) initiative to arrange a precautionary repo facility whereby additional euro liquidity could be provided to the domestic financial system, in case of need. In this way, an additional type of support is secured for the domestic economy in conditions of the COVID-19 pandemic.

The ECB and the NBS have agreed to set up a repo line arrangement to provide euro liquidity to Serbian financial institutions to address possible euro liquidity needs in the presence of market dysfunctions due to the COVID-19 shock.

Under a repo line, the ECB provides euro liquidity to a non-euro area central bank in exchange for adequate euro-denominated collateral.

Under the repo line, the NBS will be able to borrow up to €1 billion from the ECB. The maximum maturity of each drawing will be three months. The repo line will remain in place until the end of June 2021, unless an extension is decided.

The NBS reiterates that neither dinar nor FX liquidity of the domestic banking sector is jeopardized. Even before the crisis caused by the coronavirus, banks operated in an environment of high liquidity surpluses. By implementing timely and adequate measures since the beginning of the crisis, the NBS has provided additional support to the liquidity of Serbia’s financial system. The country’s high FX reserves are more than sufficient to ensure a response to any potential FX liquidity shock. Given the current global pandemic-induced uncertainty, the precautionary repo line with the ECB instills security and sends a strong message that the NBS is undertaking all possible activities to preserve the stability of the domestic financial market and the economy as a whole.


Governor's Office