The Council and the European Parliament today reached a provisional agreement on the directive on multiple-vote share structures for companies seeking admission to trading of their shares on an SME growth market. The directive aims at encouraging company owners, especially owners of SMEs, to list the shares of their company for the first time on an SME growth market using multiple-vote share structures, so that they can retain sufficient control of their company after listing; moreover, the Directive protects the rights of newly entering shareholders by introducing safeguards.
The provisional agreement extends the scope of the directive to include more markets than just SME growth markets, defines the safeguards necessary for investors entering a multiple-vote share structure and establishes the necessary transparency rules for this kind of undertaking.
‘SMEs are the backbone of the European Economy and need good access to financial markets to grow, progress and create jobs. The multiple-vote share structure Directive will widen the portfolio of financial options available to them, making access to markets easier, safer and adapted to their business model. At the same time, it will make EU capital markets more attractive and competitive’.
Paul Van Tigchelt, Belgian Deputy Prime Minister and Minister for Justice and the North Sea
Encouraging SME listing
The Markets in Financial Instruments Directive (MiFID II) and the Markets in Financial Instruments Regulation (MiFIR) allowed for the creation of ‘SME growth markets’, a trading venue facilitating access to capital for SMEs. However, many entrepreneurs do not list their companies on these markets for fear of losing control due to the entry of new shareholders. One instrument to prevent this is the multiple-vote share structure, which enables controlling shareholders (i.e. company founders) to have more votes per share than new investors.
Currently, some Member States allow multiple-vote share structures, while in others they are prohibited. The Directive aims to reduce inequalities for companies seeking to raise funds on SME growth markets by creating minimum harmonisation in the Single Market that removes obstacles to SME growth markets access generated by regulatory barriers.
At the same time, the proposed Directive protects the rights of shareholders with fewer votes per share by introducing safeguards on issues such as how key decisions are taken at general meetings.
Main elements of the agreement
Scope
The provisional agreement extends the scope of the Directive to include, besides SME growth markets, any other Multilateral Trading Facility that allows the admission to trading of SME shares. A possible future extension of the scope to regulated markets could be included in the review clause.
Safeguards
The co-legislators have agreed on either a maximum voting ratio (this is the value of the votes per share that existing shareholders may hold compared to entering shareholders) being set, leaving its value to Member States’ discretion, or a restriction for (most) qualified majority decisions by the general meeting. Other safeguards remain optional.
Transparency
To help investors make the right decisions, the agreement provides for the disclosure of the annual financial statements at the time of admission to trading and, thereafter, only when such information has not previously been published or has changed since its last publication.
The co-legislators have also agreed to give a mandate to the European Securities and Markets Authority for developing regulatory technical standards on the most appropriate way of marking such shares.
Next steps
The provisional agreement reached with the European Parliament now needs to be endorsed and formally adopted by both institutions.
Background
The proposal was adopted by the Commission on 7 December 2022. On 19 April, the Council adopted its negotiating mandate for negotiations with the European Parliament, with a view to reaching an agreement at first reading.
The proposed Directive is part of the Listing Act package, a set of measures to make public capital markets more attractive to EU companies and to facilitate access to capital for small and medium-sized companies.

Commission’s proposal
Negotiating mandate

 
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WASHINGTON – On January 30 and 31, the Office of the United States Trade Representative and the European Union Directorate-General for Trade (DG Trade) hosted a two-day stakeholder event to solicit views on how to promote a more integrated and resilient Transatlantic Green Marketplace. The event brought together representatives from the U.S. and EU stakeholder communities to engage in a series of thematic stakeholder-led discussions that focused on identifying opportunities for transatlantic collaboration to promote the transition to a more sustainable and climate-neutral economy on both sides of the Atlantic.
The U.S. Trade Representative, Ambassador Katherine Tai, provided pre-recorded remarks and Executive Vice-President of the European Commission Valdis Dombrovskis provided opening remarks followed by Assistant U.S. Trade Representative Sushan Demirjian and Director Rupert Schlegelmilch of DG TRADE. The speakers framed the event by discussing the importance of stakeholder input in identifying trade priorities.  More than three hundred stakeholders from businesses, civil society, labor unions and academia participated in the event.
The two-day event opened with a workshop focused on the “Promotion of Good Quality Jobs for a Successful, Just and Inclusive Green Economy,” organized by USTR, the Department of Labor, and DG Trade and Employment. Labor and business stakeholders engaged in a productive discussion on issues related to the green transition and how we can create good-paying jobs as part of our climate policy and investments. The event was moderated by representatives from the International Labor Organization.  Stakeholders spoke about the importance of social dialogue and workers having a seat at the table to engage on environmental issues that directly impact them.
USTR looks forward to sustained stakeholder engagement as we continue work under the Transatlantic Initiative for Sustainable Trade workstream.
 
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SECRETARY BLINKEN:  Well, good morning, everyone.  It is wonderful to have our friends and colleagues from the EU here in Washington for our Trade and Technology Council number five.
Let me just say at the outset, in the challenge of these times it is particularly valuable and appreciated by the United States to have in the EU a partner of first resort, not last resort.  And if we look at the many challenges that we’re working on closely together, we know that we reinforce each other, and that makes a big difference.  We, obviously, have a partnership that’s built on commonly shared values, shared interests, and an extraordinary and thriving transatlantic economy.
Let me just say briefly about the TTC itself, I found in my experience – and I think I can speak as well for Gina and Katherine – that this has been an indispensable tool for transatlantic economic cooperation.  And we’ve seen tremendous progress over the last couple of years: aligning technology standards, building resilience in our supply chains, stopping the evasion of Russian sanctions and export controls, and countering some of the non-market practices of the PRC, as well as engaging on – against economic coercion.
This session today will hopefully – and I know – build on the progress that we’ve made in the previous TTCs.  We’ll be focusing on economic security, on emerging technology, and on locking in achievements in the run-up to what will be really the capstone TTC in Belgium later this year.
For economic security, I think there’s a common recognition that we must continue to de-risk our economies, to diversify further our supply chains, to focus on common threats – including authoritarian governments that may misuse technology.  And this is maybe one of the greatest shared challenges we face and concerns that our citizens have, because it’s something that affects them every single day in their lives.
We also have work to do – but I think also opportunity – in together looking at how we can help shape some of the norms, the standards, the rules by which emerging technology are used, again, things that shape the lives of our citizens every single day.  We’ve already made – but we can build on – joint progress on artificial intelligence.  I think there’s a real opportunity to jointly develop responsible rules of the road for AI and other emerging technologies.  And then continuing to use the TTC as an avenue to be able to forge ahead on critical issues and managing risks of other cutting-edge technologies.
So there’s a lot to cover today, as there always is.  Margrethe, let me give the floor to you, and then we can actually get down to work.  And we may even get down to lunch after that.  (Laughter.)
MS VESTAGER:  Yeah.  Without sharing food, you will get nowhere.
Well, first and foremost, thank you very much for hosting us in these exquisite rooms.  This is – it’s an honor for us to be here.  And I just want to basically mirror what you just said, because the Trade and Technology Council has become absolutely key to our geopolitical agenda.  It’s constructive; it is committed; it produces results.  And I think it’s for – I’ve learned a lot from this, and I hope also for the future a lot of learnings can be taken to continue deepening the relationship.
The setup that we have – not only between us getting to know one another, trust one another, but also for the teams to get to know each other in full – I think that cannot be overestimated.  That was what made us so efficient in the sanctions against Russia.  Everybody had met each other.  They knew the phone numbers, the mail addresses, the values, what they wanted to put into real life.
And building on that, what we have done on semiconductors, which is essential for our economies but also essential for geopolitical balances; how we from very early days agreed on the approach to artificial intelligence with an optimistic view for the innovation, while being cautious for the risks; and now I think also moving ahead to see how can we embark on a quantum travel together.  So still a lot to do to give real muscle to our mutual considerations of economic security.
I think this has shown that when we praise the transatlantic relationship, it’s not just for the speeches – it’s also real life.  And once again proven that if you want to deliver to your own citizens, you need to have a common solution.  I think it is amazing what we are achieving of amazing results to the benefit of citizens.  I think we see that with stakeholders, every one of us just this morning – Gina and I was with stakeholders of the semiconductor industry.  And they come, they share with us, and I think there is a great deal of appreciation of this investment on both sides.
So thank you very much for this, and looking very much forward for the meeting today.
SECRETARY BLINKEN:  Margrethe, thank you so much.  And again, Thierry, Valdis, welcome, welcome, welcome.  Thanks, everyone.
 
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Major emerging markets have shown resilience to global rate gyrations, but more challenging times could be ahead.
Global interest rates in recent months have gone on a rollercoaster, especially those on longer-term government bonds. Yields on 10-year US Treasuries are climbing again after pulling back from a 16-year high of 5 percent in October. Interest rate moves in other advanced economies had been equally prodigious.
Emerging market economies, however, saw much milder rate moves. We take a longer-term perspective on this in our latest Global Financial Stability Report, demonstrating that the average sensitivity to US interest rates of 10-year sovereign yield of Latin American and Asian emerging markets declined by two-thirds and two-fifths, respectively, during the current monetary policy tightening cycle compared with the taper tantrum in 2013.
While the lower sensitivity is in part due to the divergence in monetary policy between advanced economies’ and emerging markets’ central banks over the past two years, it nonetheless challenges findings in the economic literature that show large spillovers from advanced economies’ interest rates to emerging markets. In particular, major emerging markets have been more insulated from global interest rate volatility than would be expected based on historical experience, especially in Asia.

There are other signs of resilience in major emerging markets during this period of volatility. Exchange rates, stock prices, and sovereign spreads fluctuated in a modest range. More remarkably, foreign investors did not leave their bond markets, in contrast to past episodes when large outflows ensued after surges in global interest rate volatility, including as recently as 2022.
This resilience was not just good luck. Many emerging markets have spent years improving policy frameworks to mitigate external pressures. They have built additional currency reserves over the last two decades. Many countries have refined exchange-rate arrangements and moved towards exchange-rate flexibility. Significant foreign exchange swings have contributed to macroeconomic stability in many cases. The structure of public debt has also become more resilient, and both domestic savers and domestic investors have become more confident investing in local-currency assets, reducing reliance on foreign capital.
Perhaps most importantly, and closely aligned with IMF advice, major emerging markets have enhanced central bank independence, improved policy frameworks, and gained progressively more credibility. We would also argue that central banks in these countries have gained additional credibility since the onset of the pandemic by tightening monetary policy in a timely manner and bringing inflation toward target as a result.
During the post-pandemic era, many central banks hiked interest rates earlier than counterparts in advanced economies—on average, emerging markets added 780 basis points to monetary policy rates compared to an increase of 400 basis points for advanced economies. The wider interest differentials for those emerging markets that hiked rates created buffers for emerging markets that kept external pressures at bay. In addition, the rise in prices of commodities during the pandemic also helped the external positions of commodity-producing emerging markets.
Global financial conditions too have remained quite benign during the current global monetary policy tightening cycle, especially last year. This contrasts with previous hiking episodes in advanced economies, which were accompanied by a much more pronounced tightening of global financial conditions.
Looking ahead
Despite reaping rewards from years of building buffers and pursuing proactive policies, policymakers in major emerging markets need to stay vigilant with an eye on the challenges inherent in the “last mile” of disinflation and rising economic and financial fragmentation. Three challenges stand out:

Interest rate differentials are narrowing as some emerging markets are anticipated by investors to cut rates faster than advanced economies, which could entice capital to leave emerging market assets in favor of assets in advanced economies;
Quantitative tightening by major advanced economies continues to withdraw liquidity from financial markets, which could additionally weigh on emerging market capital flows;
Global interest rates remain volatile, as investors—reacting to central banks emphasizing data-dependency—have grown more attentive to surprises in economic data. Perilous for emerging markets are market projections that central banks in advanced economies will materially cut rates this year. Should this prove wrong, investors may once again reprice in higher-for-longer rates, weighing on risky asset prices, including emerging market stocks and bonds.

A slowdown in emerging markets, as projected by the latest World Economic Outlook update, operates not only through traditional trade channels, but also through financial channels. This is particularly relevant now, as more borrowers globally are defaulting on loans, in turn weakening banks’ balance sheets. Emerging market bank loan losses are sensitive to weak economic growth, as we showed in a chapter of the October Global Financial Stability Report.
Frontier emerging markets—developing economies with small-but-investable financial markets—and lower-income countries face greater challenges, the primary one being the lack of external financing. Borrowing costs are still high enough to effectively prohibit these economies from obtaining new financing or rolling over existing debt with foreign investors.
High financing costs reflect the risks associated with emerging market assets. Indeed, the dollar returns on these assets have lagged similar advanced economies’ assets during this high-rate environment. For instance, emerging market bonds for high-yield, or lower-rated, issuers have returned about zero percent on net over the past four years, while US high-yield bonds have provided 10 percent. So-called private credit loans provided by nonbanks to lower-rated US companies have returned even more. The sizable differences in returns may not bode well for emerging markets’ external financing prospects as foreign investors with mandates that allow for investments across asset classes can find more-profitable alternative assets in advanced economies.

While these challenges for emerging market and frontier economies require close attention by policymakers, there are also many opportunities. Emerging markets continue to see significantly higher expected growth rates than advanced economies; capital flows to stock and bond markets remain strong; and policy frameworks are improving in many countries. Hence the resilience of major emerging markets that has been important for global investors since the pandemic may continue.
Vigilant policies
Emerging markets should continue to build on the policy credibility they have gained and be vigilant. Facing elevated global interest rate volatility, their central banks should continue to commit to inflation targeting, while remaining data dependent in their inflation objectives.
Keeping monetary policy focused on price stability also means using the full spate of macroeconomic tools to fend off external pressures, with the IMF’s Integrated Policy Framework providing guidance on the use of currency intervention and macroprudential measures.
Frontier economies and low-income countries could strengthen engagement with creditors—including through multilateral cooperation—and rebuild financial buffers to regain access to global capital. In the bigger picture, countries with credible medium-term fiscal plans and monetary policy frameworks will be better positioned to navigate periods of global interest rate volatility.
 
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Today, the European Union and the United States held the fifth meeting of the EU-US Trade and Technology Council (TTC) in Washington, D.C. The meeting allowed ministers to take stock of the progress of the TTC’s work and to provide political steer on key priorities for the next TTC Ministerial meeting, which will take place in Belgium in spring.
The TTC is the main forum for close cooperation on transatlantic trade and technology issues. It was co-chaired by European Commission Executive Vice-President Margrethe Vestager, European Commission Executive Vice-President Valdis Dombrovskis, US Secretary of State Antony Blinken, US Secretary of Commerce Gina Raimondo, and US Trade Representative Katherine Tai, joined by European Commissioner Thierry Breton.
Participants showed a strong, shared desire to continue to increase bilateral trade and investment, co-operate on economic security and emerging technologies and to advance joint interests in the digital environment. In the margins of this TTC meeting, both sides agreed to continue to explore ways to facilitate trade in goods and technologies that are vital for the green transition, including by strengthening the cooperation on conformity assessment. The EU and the US have also committed to make tangible progress on digital trade tools to reduce the red tape for companies across the Atlantic and to strengthen our approaches to investment screening, export controls, outbound investment, and dual-use innovation.
Following their commitment at the last TTC Ministerial, the EU and the US welcomed the International Guiding Principles on Artificial Intelligence (AI) and the voluntary Code of Conduct for AI developers adopted in the G7 and agreed to continue cooperating on international AI governance. Both parties also welcomed the industry roadmap on 6G which sets out guiding principles and next steps to develop this critical technology. They also took stock of progress in supporting secure connectivity around the globe, notably for 5G networks and undersea cables.
The EU and the US are also intensifying their coordination on the availability of critical raw materials crucial for semiconductor production, having activated the joint TTC early warning mechanism for semiconductor supply chain disruptions, following China’s announced controls on gallium and germanium. They continued to exchange information on public support for the investments taking place under the respective EU and US Chips Acts. A roundtable on the semiconductor supply chain took place in the margins of the TTC, focusing on developments and potential cooperation in the legacy semiconductor supply chains. Finally, the EU and the US discussed a report mapping EU and US approaches to digital identity, currently open for comments.
At a stakeholder meeting on Crafting the Transatlantic Green Marketplace, which takes place on 31 January, stakeholders will present their views and proposals on how to make transatlantic supply chains stronger, more sustainable and more resilient. A series of workshops will take place to boost the transatlantic green marketplace and to promote good quality jobs for the green transition, as well as workshops on the solar supply chain, permanent magnets and investment screening.
Both sides agreed that the next TTC Ministerial meeting will take place in spring in Belgium, hosted by the Belgian Presidency of the Council.
Background
European Commission President Ursula von der Leyen and US President Joe Biden launched the EU-US TTC at the EU-US Summit in Brussels in June 2021. The TTC serves as a forum for the EU and the US to discuss and coordinate on key trade and technology issues, and to deepen transatlantic cooperation on issues of joint interest.
The inaugural meeting of the TTC took place in Pittsburgh on 29 September 2021. Following this meeting, 10 working groups were set up covering issues such as technology standards, artificial intelligence, semiconductors, export controls and global trade challenges. This was followed by a second summit in Paris on 16 May 2022, a third summit in College Park, Maryland, in December 2022, and a fourth in Luleå, Sweden in May 2023.
The EU and the US remain key geopolitical and trading partners. EU-US bilateral trade has reached historic levels, with over €1.5 trillion in 2022, including over €100 billion of digital trade.
 
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The financial disruptions during the coronavirus pandemic and Russia’s invasion of Ukraine have once again underscored the importance of euro liquidity lines. The market tensions triggered by these crises squeezed euro liquidity in a significant number of non-euro area countries. In response, the ECB extended euro liquidity lines to the relevant central banks, thus enabling them to alleviate the funding strains on their domestic financial institutions. Providing euro liquidity to non-euro area countries shields the transmission of monetary policy in the euro area and minimises the risks of adverse feedback loops, making the euro area more resilient.
We recently adjusted our framework for the provision of euro liquidity through the ECB’s swap and repo operations to make these instruments as effective and agile as possible.[1] The framework retains the fundamental elements already in place, and integrates the existing repo facilities into a unified permanent framework called the Eurosystem repo facility for central banks (EUREP). These changes came into effect on 16 January 2024.
The changes to the framework reflect three key lessons from recent experiences. First, that the risks of negative effects on monetary policy transmission increase in the event of disorderly market conditions outside the euro area. Second, that the ECB must be able to react quickly to rapidly unfolding events. And third, that the mere existence of a liquidity line pre-empts financial tensions from materialising. The revised framework gives those countries with close economic and financial links to the euro area either standing or fixed-term renewable access to our liquidity lines in normal times. It also expands access to a broader set of countries in times of crisis or a heightened risk of crisis. At the same time, the role of liquidity lines as a “backstop” is reinforced with appropriate surcharges on lending rates. These surcharges help preserve incentives for non-euro area banks to first try to borrow from the private market before resorting to liquidity lines. They also limit the scope for unintended adverse side effects such as excessive foreign borrowing in euro.
Strong demand for euro liquidity lines during recent crises
Amid financial market tensions during the initial phase of the pandemic, the ECB received a first wave of requests for liquidity lines within a relatively short period of time around March 2020. A second wave of requests reached the ECB after the Russian invasion of Ukraine in February 2022. While most of these requests originated from non-euro area EU countries and EU candidate and potential candidate countries, several inquiries for euro liquidity also came from other European countries and other regions of the world (Chart 1).

Chart 1
Number of requests for ECB liquidity lines by region

Source: ECB
Notes: Requests include inquiries under the main framework and EUREP. The blue shaded area signals the onset of the pandemic, the grey shaded area the start of Russia’s invasion of Ukraine.

As part of our response to these requests we set up a temporary repo facility, EUREP, which provided an additional precautionary backstop for central banks of countries that were not eligible under the then prevailing ECB framework, as we described in more detail in 2020. We subsequently prolonged the facility in response to Russia’s war in Ukraine and the resulting market tensions.
As the severe financial market tensions and high degree of uncertainty and contagion risk presented a clear monetary policy case, the Governing Council accommodated many of these requests. The ECB offered non-euro area central banks either swaps or repos, the latter under either the main framework or EUREP. With the choice of instrument, we took into account the need to protect the ECB’s balance sheet against financial risks. We only granted swaps in cases where those risks were limited or where it was useful for the ECB to have reciprocal access to the currency issued by the foreign central bank in question.

Chart 2
Usage of euro liquidity lines
(Outstanding amounts in euro millions as at end of day15 January 2024)
Source: ECB.
Note: Outstanding amounts refer to the aggregate daily amount of euro-denominated liquidity provided across all central bank liquidity lines.

While use of the facilities has remained sporadic and for small amounts (Chart 2), this should not be taken as a sign that they are not needed. As the recent crises have shown, the mere existence of precautionary liquidity arrangements can have a calming effect. Empirical evidence suggests that the ECB’s liquidity lines have been effective in reducing financial pressures on euro funding markets.[2]
Our review of the existing framework confirmed that liquidity lines granted to non-euro area central banks are monetary policy instruments. They help to prevent impairments in the monetary policy transmission arising from heightened foreign euro demand or disruptions in cross-border wholesale funding. By providing euro liquidity, they also help the ECB fulfil its price stability objective, which remains the primary motivation for granting liquidity lines.
In addition, liquidity lines prevent euro liquidity shortages from morphing into financial stability risks. They provide a backstop source for borrowing in euro, which limits the scope for upward pressure on euro money market rates and removes the incentives for fire sales of euro-denominated securities by foreign investors.[3]
Finally, the ECB’s liquidity lines also have benefits for the pursuit of price stability by fostering the international use of the euro in global financial and commercial transactions. They enhance the transmission of monetary policy on a more structural basis, too, since a clear framework for liquidity lines signals the ECB’s willingness to provide a backstop if a crisis were to materialise.[4]
The new framework continues to acknowledge the risk that liquidity lines may affect incentives in ways that are undesirable from a euro area monetary policy perspective. In particular, if access to euro liquidity is perceived as easy, this may encourage unhedged currency exposures in the country receiving euro liquidity and heighten financial euroisation. It may also lower incentives for monetary authorities to maintain foreign exchange reserve safeguards and keep prudent financial regulations in place. This, in turn, could lead to more frequent crisis episodes in recipient countries.
This is why the new ECB framework maintains the features established to address these risks. First, liquidity lines are regularly reviewed and can be terminated if such risks were detected. Second, most of the temporary lines are established via repo agreements for which the non-euro area central bank needs to pledge high-quality euro-denominated collateral to ensure that the lines do not substitute prudent foreign reserve management. Third, the operational parameters of a euro liquidity line are set in a way that encourages a return to market-based arrangements. They foresee, among other things, a backstop rate at which euro liquidity is provided, which is close to the rate at which the ECB provides euro liquidity to its domestic counterparties. Such pricing encourages reliance on market funding since the use of the liquidity lines may be expensive. Our liquidity lines provide only short-term funding with a maximum tenor of a few months to ensure that they only address temporary liquidity needs. This encourages the return to market-based arrangements as soon as possible. Fourth, the pricing can be adjusted to discourage borrowing when it is not consistent with our monetary policy stance.
As before, liquidity lines must not be used for foreign exchange interventions but are meant as a means for foreign central banks to provide euro liquidity to their domestic financial institutions.
We continue to decide on liquidity lines, and the choice between swaps and repos, based on several factors: the requesting country’s systemic relevance, its economic, financial or institutional interconnectedness with the euro area, the strength of fundamentals and creditworthiness as well as any reciprocal need for foreign currency.[5]
Our case-by-case approach remains unchanged. The Governing Council assesses all requests individually, taking into account the monetary policy rationale and risks entailed.
What has changed?
The crisis experiences have shown the importance of an agile and flexible framework which the Governing Council can activate quickly in response to different kinds of shocks.
As before, the ECB can still extend swap and repo lines. What is new, however, is that all repo lines are now brought together in a permanent EUREP facility. This abolishes the distinction between the main framework and EUREP.
In normal times, only shocks in countries with sufficiently tight financial and economic links to the euro area have the potential to impair monetary policy transmission.
Indicators of such links are the size of a country’s economy, its level of euroisation and the financial and economic interconnectedness, including institutional linkages such as EU membership. To put this in perspective, the countries with a standing euro swap line account for 23.8% of global economic activity and 34.5% of the euro area’s total external trade.
In times of crisis, risks of adverse feedback loops increase. Typically, this happens through deteriorating investor sentiment vis-à-vis risky assets, an increased sensitivity to pre-existing vulnerabilities, or a destabilising repricing of euro area securities triggered by fire sales abroad.[6] This can impinge on euro area financial markets and, by impairing monetary policy transmission, on price stability.
This is why, building on the experience with the ad hoc EUREP facility during the pandemic and Russia’s war in Ukraine, the new framework provides for access conditions to be broadened in times of crisis or when there is a heightened risk of a crisis materialising. This is when contagion and asset fire sales may have particularly strong adverse effects on euro area financing conditions, leading to deeper monetary policy implications.
Hence, in normal times, liquidity lines can only be extended if an economy is of systemic relevance to the euro area. But in times of crisis, liquidity lines can also be extended to countries that have limited individual systemic relevance. That may be the case if, amid disorderly market conditions, such smaller countries could together adversely affect monetary policy transmission. In view of heightened regional risks associated with the ongoing Russian war against Ukraine and the conflict in the Middle East, we have applied this feature of the new framework to prolong the repo lines of several non-EU European countries until 31 January 2025.
The new streamlined framework also harmonises pricing and our risk control, in particular with regard to collateral eligibility requirements for repo lines. This will improve the efficiency of our decision-making.
Finally, we have also updated our communication policy. We will now disclose the full set of liquidity lines granted under the new framework as of 29 January 2024. The liquidity lines currently in place include eight swap arrangements with countries of major systemic relevance. Most of them take the form of reciprocal arrangements which also give the ECB access to the respective foreign currency. In addition, we have granted seven repo arrangements under EUREP.
Overall, the revised framework makes improvements in several areas, while maintaining its key features. These are summarised in Table 1 below.
Table 1

Maintained features

Liquidity lines as monetary policy tools
Backstop pricing
Maximum, short-term tenors of drawings
Not to be used for foreign exchange interventions
Case-by-case assessment on the basis of eligibility criteria

Adjusted features

All repos offered under EUREP, which is now permanent
Streamlined and simplified eligibility criteria
Broadened access in times of crisis or a heightened risk thereof
Harmonised pricing and risk control framework
Disclosure of all extended lines

Conclusion
ECB President Christine Lagarde has said recently that the world is going through “an age of shifts and breaks” in which it faces an unprecedented series of shocks.[7] Central banks play a crucial stabilising role in this situation, and euro liquidity lines are an important part of the ECB’s toolkit to protect monetary policy transmission and strengthen resilience against crises. We are confident that our new framework will live up to the challenges of international liquidity provision in an increasingly volatile world in which central banks need to contribute to stability in line with their mandates.
The views expressed in each blog entry are those of the author(s) and do not necessarily represent the views of the European Central Bank and the Eurosystem.

 
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Increasing impact of climate crisis on economy and financial system drives need for more action
ECB reaffirms commitment to ongoing climate actions and will review them regularly
Three focus areas to guide work for 2024 and 2025: implications of green transition, physical impact of climate change, and nature-related risks for the economy and financial system

The European Central Bank (ECB) has decided to expand its work on climate change, identifying three focus areas that will guide its activities in 2024 and 2025:

the impact and risks of the transition to a green economy, especially the associated transition costs and investment needs;
the increasing physical impact of climate change, and how measures to adapt to a hotter world affect the economy;
the risks stemming from nature loss and degradation, how they interact with climate-related risks and how they could affect the ECB’s work through their impact on the economy and financial system.

“A hotter climate and the degradation of natural capital are forcing change in our economy and financial system. We must understand and keep up with this change to continue to fulfil our mandate”, said ECB President Christine Lagarde. “By broadening and intensifying our efforts we can better understand the implications of these changes and, in doing so, help to underpin stability and support the green transition of the economy and the financial system.”
To this end, the following concrete measures have been agreed.

On the transition to a green economy, the ECB will intensify its work on the effects of transition funding, green investment needs, transition plans and how the green transition affects aspects of our economy such as labour, productivity and growth. The results will also inform the ECB’s macro modelling framework. Furthermore, the ECB will explore, within its mandate, the case for further changes to its monetary policy instruments and portfolios in view of this transition.
On the increasing physical impact of climate change, the ECB will deepen its analysis of the impact of extreme weather events on inflation and the financial system, and how this can be integrated into climate scenarios and macroeconomic projections. It will also assess the potential impact of adaptation, or lack thereof, to climate change on the economy and financial sector, including related investment needs and the insurance protection gap.
On nature loss and degradation, the ECB will analyse the close link with climate change, and the associated economic and financial implications. It will also further explore the role of ecosystems for the economy and the financial system.
With regard to its own operations, the ECB will launch its eighth Environmental Management Programme to support achieving its 2030 carbon reduction targets. Together with the entire Eurosystem, its work will include eco-design principles for the future euro banknote series and incorporate environmental footprint considerations into the design of a digital euro that is currently in the preparation phase.

The decision to step up efforts in these areas follows the ECB’s stocktake of its climate actions since launching its 2022 climate agenda, and an adjustment of its work plan in the light of the changing environment and improvements in data availability and methodologies.
The work planned for these focus areas will complement the ECB’s current climate-related actions in its ongoing tasks, including monetary policy and banking supervision. The ECB will improve its climate-related indicators, risk monitoring and disclosures, and continue to contribute to the development of climate-related policies in European and international fora. Looking ahead, the ECB remains committed to regularly reviewing these actions to ensure they are fit for purpose and contribute to fulfilling its mandate.
A comprehensive overview of the planned work programme for 2024 and 2025 is available in the Annex and more information can be found on the ECB’s website.
Notes

The ECB needs to account for the effects of climate change in the conduct of its tasks within its mandate. Additionally, without prejudice to its price stability objective, the ECB must support the general economic policies in the European Union, with a view to contributing to a high level of protection of and improvement in the quality of the environment. This includes the goals of the European Climate Law. Under Article 11 of the Treaty on the Functioning of the European Union, the ECB is also required to integrate environmental protection requirements into the definition and implementation of its policies and activities.
The ECB introduced climate change considerations into its monetary policy framework following its strategy review in 2021.

 
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