Agreement between the National Bank of Serbia and the European Central Bank on providing liquidity in Serbia in euros

The National Bank of Serbia (NBS) and the European Central Bank (ECB) have reached an agreement on extending the duration of the preventive repo line through which the ECB, if necessary, the NBS could provide additional liquidity in euros to the domestic financial system, it was announced today.
The repo line, established in July 2020 with a plan to last until the end of June 2021, has now been extended for nine months and will last until March 2022.
This continued the successful cooperation of the NBS with the central monetary institution of the Eurozone, the NBS stated in a statement.
The repo line provides the possibility for the NBS to borrow a maximum of one billion euros from the ECB, whereby each individual use of funds can be for a maximum period of three months.
As the NBS pointed out, dinar and foreign currency liquidity in the domestic financial system are at a high level and were not endangered at any time, both before and after the outbreak of the crisis caused by the Covid-19 pandemic.
“Since the beginning of the pandemic, the NBS has been taking timely and adequate measures aimed at supporting the dinar liquidity of the domestic financial system, while the high level of the country’s foreign exchange reserves guarantees the necessary security in the field of foreign exchange liquidity,” the Serbian central bank said.
As he explained, the NBS has so far not had the need to use funds based on the ECB’s repo line, and does not expect it to be used in the coming period, but to serve as an additional guarantor of security.
Through preventive repo lines, the ECB, in the event of potential market disruptions caused by the Covid-19 pandemic, provides the possibility of providing liquidity in euros to the central banks of non-euro area countries, in exchange for appropriate collateral (financial collateral) in that currency, Danas reports.