The European Central Bank (ECB) and Croatia's central bank HNB have agreed on the extension of the temporary swap line until the end of March 2022. The agreement allows HNB to borrow up to €2 billion from the ECB in exchange for the local currency kuna, HNB reported on Thursday.

“The liquidity lines were established in 2020 to provide euro liquidity to financial institutions through national central banks,” said HNB in a press release.

“The main objective of these lines is to address possible euro liquidity needs in non-euro area countries in the presence of market dysfunctions due to the Covid-19 pandemic. Furthermore, they aim at ensuring a smooth transmission of ECB monetary policy by preventing potential spill-back effects on euro area financial markets and economies. The euro liquidity line with the HNB had been initially set to expire by the end of 2020 and was later extended until the end of June 2021,” they added.

The ECB had decided in December 2020 to offer a nine-month extension of its temporary swap and repo lines with non-euro area central banks.

“The central banks of Albania, Croatia, Hungary, North Macedonia, Romania, San Marino, and Serbia have agreed to extend the duration of their euro liquidity lines with the ECB to March 2022,” the ECB said.