ECB and Hrvatska narodna banka set up new swap line
• Swap line to remain in place until end-2020, or as long as needed
• Size of swap line set at €2 billion
The European Central Bank (ECB) and Hrvatska narodna banka (Croatian National Bank) have agreed to set up a precautionary currency agreement (swap line) to provide euro liquidity to Croatian financial institutions in order to address possible market dysfunction.
Under the new swap line, Hrvatska narodna banka will be able borrow up to €2 billion from the ECB in exchange for Croatian kuna. The maximum maturity for each drawing will be three months. The swap line will remain in place until 31 December 2020, unless it is extended.
Croatia is preparing for participation in the exchange rate mechanism (ERM II), which is a prerequisite for a Member State to join the euro area.