The EUREP is a repo facility that provides euro liquidity in exchange for euro collateral and, as such, is different to a FX swap line, where the ECB accepts good-quality FX in exchange for euro liquidity. At present, the ECB has FX swap arrangements with the likes of the Fed, the Bank of England, the Bank of Japan, the Swiss National Bank, the Riksbank and the People’s Bank of China.
But we think the roll-out of this broader EUREP facility could have the ancillary benefits of FX swap line roll-outs, which countries like China have been pursuing to enhance the use of the renminbi in international trade. Presumably, FX swaps are more accessible, but a euro-denominated facility would be supported by the already deep bond market and large international footing; there are €11.5tr of EUR-denominated international debt securities outstanding, which is 40.5% of the global market.
China has been expanding the PBoC’s bilateral FX swap‑line network, which functions primarily as an emergency liquidity channel. The bilateral agreement network now covers over 40 countries, with around 35 of those agreements established before 2016, although new lines still appear almost every one to two years. This expansion has supported China’s efforts to deepen its international trade and financial ties and advance CNY’s international role: between 2021 and 2025, the CNY share in SWIFT trade‑finance transactions more than quadrupled to 8.3%, overtaking the euro for second place worldwide. At the same time, China’s RMB payment system, CIPS, has grown rapidly in geography and volume, reaching RMB700-800bn ($100-115bn) in daily transaction volume.
Greater international comfort in holding the euro in FX reserves should – especially given that 40% of international debt securities are already denominated in euros – support greater use of the euro in trade invoicing and reinforce our view of a gradual transition from a unipolar dollar world to a multipolar world of dollars, euros and renminbi.
