EXCLUSIVE-ECB to widen access to euro loans in bid to boost global role, sources say

By Francesco Canepa and Balazs Koranyi

FRANKFURT, Feb 5 (Reuters) - The European Central Bank is working on opening up access to euro liquidity to more countries, making it cheaper and easier to obtain as part of efforts to bolster the international role of the single currency, three sources told Reuters.

ECB President Christine Lagarde has long seen these liquidity lines as a key tool to boost the euro's global reach, particularly at a time when investors are reassessing the dollar's status due to the unpredictable nature of U.S. President Donald Trump's economic policy.

The move, the details of which are still being worked out and will likely be announced around the Munich Security Conference next week, will result in more generous terms for gaining access to the ECB's repurchase agreements, the sources said.

These allow foreign central banks to borrow euros against collateral denominated in the single currency and are designed for times of crisis, when commercial banks outside the euro zone may struggle to get liquidity in euros.

RATES LOWERED, CAPS EASED

Under the changes, the interest rate on these operations would be lowered, rules would be standardised and stringent caps on how much each country's central bank could borrow from the ECB would be eased, the sources said.

The ECB would, however, reserve the right to turn down a central bank on reputational grounds and the Governing Council of policymakers may have the final word on any transaction, they added.

An ECB spokesperson declined to comment.

Lagarde hinted at some of these changes during her press conference on Thursday, saying the ECB would make repo lines more attractive to other national central banks outside the euro area and beyond.

This facility, known as Eurep, is currently only available to eight countries that neighbour the euro area, including European Union nations such as Romania and Hungary, and others including Albania and Montenegro.

Access to such a facility often strengthens smaller nations' ability to withstand financial market stress.

Repo lines are not often used and take-up has been modest in recent months, but there was a spike to 3.9 billion euros at the end of last year.

ECB policymakers discussed the initiative at a meeting on Thursday. Some felt the ECB had been too political in the past when deciding which central banks should obtain a Eurep line, one source said. Serbia, for example, has been denied access to Eurep.

China has similar ambitions, with President Xi Jinping reportedly saying his country should build a powerful currency that could be widely used in international trade, investment and foreign exchange markets, and attain reserve currency status.