Central Banks Currency Swaps Tracker

Introduction

Since the financial crisis of 2007, central banks around the world have entered into a multitude of bilateral currency swap agreements with one another. These agreements allow a central bank in one country to exchange currency, usually its domestic currency, for a certain amount of foreign currency. The recipient central bank can then lend this foreign currency on to its domestic banks, on its own terms and at its own risk.

Swaps involving the U.S. Federal Reserve were the most important of all the cross-border policy responses to the financial crisis, helping to alleviate potentially devastating dollar funding problems among non-U.S. banks. Fed swaps again helped to prevent global dollar shortages in early 2020, when the spread of the COVID-19 pandemic plunged the world into deep recession. Over the last decade, China has tried to position itself as a global lender of last resort, extending swap lines to indebted countries mired in balance of payments and sovereign debt crises. Thirteen of the seventeen countries that have drawn on their swap lines with China have done so to fortify their foreign reserves, with amount outstanding hitting a new high in 2023.  

The sections below explain how currency swaps work and highlight major developments in the currency swap arrangements of the three largest central banks––the Federal Reserve, the European Central Bank, and the People’s Bank of China. Each section traces how these three central banks shaped the evolution of the global swap network mapped in the interactive.

How Swaps Work

A bilateral currency swap agreement generally follows a simple process: 

Depending on the terms of the arrangement, swap lines are unidirectional or reciprocal. Following the above example, if a swap line is unidirectional, Central Bank 2 agrees to provide liquidity to Central Bank 1 against Currency A, which serves as collateral. If a swap line is reciprocal, Central Bank 1 can also provide liquidity to Central Bank 2 against Currency B. Some agreements involve a third currency, where Central Bank 1 (e.g., Bank of Japan) agrees to provide liquidity to Central Bank 2 (e.g., Bank of Indonesia) in Currency A (e.g., yen) as well as Currency C (e.g., dollars). While both unidirectional and reciprocal agreements exist, most swap lines are de facto unidirectional, with the largest central banks providing funds in response to crisis-driven liquidity shortages.

Currency swaps in the above interactive show amount outstanding from agreements between two central banks. It is important to note, however, that swap lines can in some cases be financed by other government entities. The U.S. Treasury, for example, has extended a $20 billion swap line to the Argentine central bank, while Japan’s Ministry of Finance has maintained swap lines with the central banks of Indonesia, the Philippines, Thailand, Malaysia, Singapore, India, and South Korea. These treasury facilities are secured loans dressed in swap form. While uncommon, such arrangements can provide a valuable financial safety net for developing economies. 

While swaps are structured to hedge against currency fluctuations, risks remain if a central bank fails to honor the agreement. This makes swaps a significant gesture of political trust. As such, they have drawn scrutiny: U.S. legislators criticized the Fed’s 2008 swaps as “bailing out” foreign banks, while Chinese “netizen” commentators have questioned the risks of the PBoC lending to unstable economies like Russia and Argentina.

Federal Reserve Swaps

Global Financial Crisis (2007-2008)

On December 12, 2007, the Federal Reserve extended swap lines to the European Central Bank (ECB) and Swiss National Bank (SNB). European bank demand for dollars had been rising, and creating accentuated volatility in, U.S. dollar interest rates. According to a press release by the Fed, the swap lines were intended “to address elevated pressures in short-term funding markets,” and to do so without the Fed having to fund foreign banks directly. 

On September 16, 2008, two days after the collapse of Lehman Brothers, the Federal Open Market Committee (FOMC) gave the foreign-currency subcommittee the power “to enter into swap agreements with the foreign central banks as needed to address strains in money markets in other jurisdictions.” This enabled the subcommittee to extend swap lines to other central banks, and to expand the size of the existing swap lines, without the need for the full FOMC to vote on it. The oral understanding was that the subcommittee would have the authority to extend swap lines to Group of Ten (G10) central banks, but that swaps beyond that group would require approval by the full FOMC. Two days after the subcommittee was granted this power, the Fed expanded the size of the swap lines with the eurozone and Switzerland, and extended three new swap lines, to Canada, the United Kingdom (UK), and Japan. On September 24, 2008, further swap lines were extended to Australia, Denmark, Norway, and Sweden. On October 28, 2008, a swap line was extended to New Zealand. Lending through these swap lines reached a maximum of $586 billion in December 2008. 

The Fed also extended swap lines to Brazil, Mexico, South Korea, and Singapore in October 2008. How were these countries chosen, out of the many that requested them? 

Both the State Department and the Treasury were consulted about which countries fit the criterion laid out by the Fed, which was that “intensification of stresses in [these countries] could trigger unwelcome spillovers for both the U.S. economy and the international economy more generally.” The transcript of the FOMC meeting at which the final decision was made shows that members had very specific concerns, such as whether countries with large holdings of mortgage-backed securities issued by Fannie Mae and Freddie Mac might be tempted to dump them all at once if they lacked easier access to dollars, thereby forcing up mortgage rates and impeding recovery in the United States. In his book International Liquidity and the Financial Crisis, William Allen provides estimates for a series of countries on the gap between the amount of bank liabilities in a particular currency that needed to be refinanced and the funds available for this purpose. Of these economies, the Brazilian banking system had the greatest dollar gap and the Korean banking system had the greatest gap among Asian banking systems. The Fed swap lines helped fill these dollar gaps and lowered dollar interest rates. 

COVID-19 Pandemic (2020)

By March 2020, the COVID-19 pandemic had pushed the global economy into deep recession, with governments’ public-health orders directing nearly half the world’s population to stay indoors. The cratering economy raised counterparty risk and sent borrowers scrambling for cash, which drove up the cost of lending. Just as during the 2007 crisis, developed-world central banks turned to swap lines to provide their domestic banks with foreign currency.

To expand U.S. dollar liquidity, the Federal Reserve, on March 15, cut the interest rate on its outstanding developed-world swap lines to just above zero. The Bank of Canada, Bank of England, European Central Bank, Bank of Japan, and Swiss National Bank also pledged to use their Federal Reserve swap lines to lend dollars at a maximum maturity of 84 days. Later that month, the Fed extended emergency swap lines to five more developed-country central banks—those of Australia, Denmark, New Zealand, Norway, and Sweden. Australia and Sweden were permitted to draw up to $60 billion; the lines for Denmark, New Zealand, and Norway were capped at $30 billion. Fed officials approved each swap line for six months but, in July 2020, renewed them all until March 2021.  

Throughout 2020, most of the Fed’s counterparty central banks—all but those of Canada, New Zealand, and Sweden—drew upon their U.S. dollar swap lines. Japan was by far the largest user, with its outstanding withdrawals peaking at roughly $225 billion. Whereas the Fed’s emergency swap lines of 2020 have expired, it maintains permanent swap lines with the Bank of Canada, the Bank of England, the European Central Bank, the Bank of Japan, the Bank of Mexico, and the Swiss National Bank. 

As it did during the Global Financial Crisis, the Fed again extended swap lines to select emerging-market central banks during the pandemic. The Fed approved emergency lines on March 19 for Brazil, Mexico, South Korea, and Singapore—the same nations that had received them in 2008. As with its emergency developed-world swap lines, the Fed approved the lines for six months and later renewed them through the following March. The Fed’s emergency swap line agreements with Brazil, South Korea, Mexico, and Singapore expired in 2021.  

ECB Swaps

Global Financial Crisis (2007-2008)

The ECB established swap lines with Sweden in December 2007, Switzerland and Denmark in October 2008, and the UK in December 2010. The euro area, Sweden, Denmark, and the UK had relatively low foreign exchange reserves going into the crisis, owing to the costs involved in holding reserves and the belief that there was little likelihood that more would be needed in the foreseeable future. However, banks in these countries borrowed large sums in foreign currencies in the years leading up to the crisis. When it became difficult for them to borrow funds in 2008, they turned to their central banks, reserves of which proved insufficient to meet the unanticipated demand. The ECB swap lines were therefore called into use in 2009 to provide Sweden and Denmark euros with which to top up their foreign exchange reserves, and the swap line with Switzerland was called upon to provide the ECB with Swiss francs. The swap line with the Bank of England was put in place as a precautionary measure to ensure that the Central Bank of Ireland, which is part of the Eurosystem, had access to pounds sterling, but it has never been used. Since 2007, Sweden and Denmark have more than doubled their foreign exchange reserves, the UK has doubled its reserves, and the euro area has increased its reserves by 20 percent.

The ECB initially agreed to provide euros to Hungary, Latvia, and Poland only through repurchase agreements, in which securities rather than currency are held as collateral, but eventually extended temporary swap lines to Hungary and Poland. Switzerland also provided Swiss francs to Poland and Hungary in exchange for euros. Many households in Poland and Hungary had taken out foreign-currency-denominated mortgages because of the lower interest rates available on these loans. Demand for Swiss francs and euros from the Hungarian and Polish banks that issued the loans drove up borrowing costs in these currencies; the swap lines were intended to alleviate the upward pressure this demand was placing on euro and Swiss franc interest rates.

COVID-19 Pandemic (2020)

On March 20, 2020, the ECB reactivated a swap line with the Danish National Bank––the first of its measures to stabilize markets amidst the COVID-19 pandemic. In April, the ECB approved a temporary line to Croatia, and seven days later it granted one to Bulgaria. While the pandemic considerably strained the U.S. dollar funding market, as market participants rushed to hold more of the world’s reserve currency, global markets for euros remained relatively calm. As such, all three of the newly extended swap lines were not activated.  

Over the course of the pandemic’s early months, the ECB also established repurchase agreements with Romania, Albania, North Macedonia, San Marino, Hungary and Serbia. While swap lines––extended only to countries with the highest creditworthiness––are backed by the borrowing bank’s foreign currency, repo lines extended by the ECB require high-quality euro-denominated financial assets as collateral. Without having to rely on the standing of a foreign currency, repo lines are more freely extended to non-euro area countries. Accordingly, the Eurosystem Repo Facility for central banks (EUREP) will be available to nearly all foreign central banks starting in the third quarter of 2026, further expanding the euro’s role beyond the Eurosystem and into global markets.  

PBoC Swaps

For the Fed and the ECB, the extension of swap lines has concentrated around global crisis periods. The PBoC, however, has expanded its network of currency swaps steadily and more broadly to developing economies. Since 2009, China has signed bilateral currency swap agreements with over forty counterparties. The stated intention of these swaps is to support trade and investment and to promote the international use of renminbi.  

Broadly, China limits the amount of renminbi available to settle trade, and the swaps have been used to obtain renminbi after these limits have been reached. In October 2010, the Hong Kong Monetary Authority and the People’s Bank of China (PBoC) swapped 20 billion yuan (about $3 billion) to enable companies in Hong Kong to settle renminbi trade with the mainland. In 2014, China used its swap line with Korea to obtain 400 million won (about $400,000). The won were then loaned on to a commercial bank in China, which used them to provide trade financing for payment of imports from Korea. 

Much as the Fed faced domestic criticism for “bailing out” European banks during the financial crisis, the PBoC was subjected to public chiding for signing a swap agreement with the Bank of Russia shortly before the plunge in the value of the ruble in late 2014. The PBoC felt compelled to respond through Chinese social media, explaining that swaps are collateralized based on the exchange rate prevailing at the time they are actually used, and not at old rates prevailing at the time agreements are signed. Past movements in the value of the ruble were, therefore, irrelevant—the Bank was, in fact, well protected. But the controversy highlighted how sensitive the issue of swaps had become in an era of global financial turbulence. At least 13 countries have drawn on PBoC swap lines to stabilize reserves. 

China has, for example, used its swap lines to bolster Argentina’s foreign reserves. In October 2014, a source at the Central Bank of Argentina reportedly told Telam, the Argentine national news agency, that the renminbi Argentina receives through the swap could be exchanged into U.S. dollars and other currencies. Argentina had difficulty borrowing dollars on international markets after it defaulted on its debt in July of that year and faced shortages on a range of imported goods as a result. Swapping renminbi into dollars would enable companies to import more than they would otherwise be able to. In 2023, Argentina drew on its swap line with China to avoid defaulting with the IMF. 

Argentina’s use of its swap line with China is one of a growing list of cases of developing economies relying on RMB funds. In a similar fashion, Pakistan has relied heavily on its swap line with China to support its balance-of-payments needs and repay foreign debts. In May 2013, Pakistan first drew from its swap line with China to offset its deficit, allowing the country to report a positive balance of payments and stabilize its currency. Since 2013, however, Pakistan has drawn every year on its swap line to finance its national account, its amount drawn from the PBoC swap line ballooning from $820 million to $4.3 billion in 2025. Pakistan has repeatedly requested swap line increases from the PBoC, most recently by an additional $1.4 billion. Liquidity through the swap line and additional support from China’s State Administration of Foreign Exchange (SAFE), China Development Bank, Bank of China, and ICBC allow Pakistan to maintain reserves necessary to borrow from the IMF. Paradoxically, these reserve pressures are compounded by Pakistan’s roughly $30 billion in debt to China under projects of its Belt and Road Initiative, repayments on which drain the very foreign exchange reserves that the PBoC swap line is used to replenish. Thus, for Pakistan, the PBoC is not only a source of supplementary financing: it is an international lender of last resort. 

In 2024, China continued to expand its network of bilateral swap lines, entering into agreements with Saudi Arabia and Mauritius. The Saudi arrangement is designed to serve the official purpose of PBoC swap lines and facilitate greater use of renminbi for bilateral trade settlement. However, many recent agreements and draws––such as those with Argentina and Pakistan––have instead provided emergency reserves to highly indebted developing countries. Other countries have followed China’s strategy and begun using swaps to bolster commercial and diplomatic ties with heavily indebted nations. In an apparent bid to boost its regional influence, the UAE, for example, extended local-currency swap lines to Turkey in 2022, to Egypt in 2023, and to Ethiopia in 2024. 

The Future of Swaps

In October 2008, then New York Fed President Timothy Geithner observed that Europe “ran a banking system that was allowed to get very, very big relative to GDP, with huge currency mismatches and with no plans to meet the liquidity needs of their banks in dollars in the event that we face a storm like this.” While the swap lines prevented fire sales of assets and other actions that would have exacerbated the crisis, the fact that the swap lines now appear permanent may actually encourage these “huge currency mismatches” to grow. Banks will now expect their central banks to provide them with foreign currency if market stresses once again make this funding difficult to obtain in private markets, and those who lend to foreign banks will continue to do so in the expectation that, in a crisis, they will be repaid with funds borrowed from the central bank.

Currency funding constraints, however, are a challenge largely specific to the Fed and ECB swap networks; the PBoC’s swap lines present a different problem entirely. The Fed’s permanent swap lines are generally extended to banking systems that face temporary dollar-funding shortages during periods of global market stress. Drawings spike in crises and unwind quickly as private markets normalize. The PBoC, by contrast, has extended swap lines to over forty central banks, and more than three-quarters of its partners have drawn on them not to address banking-sector currency mismatches but to support balance-of-payments positions. In several cases, central banks have rolled over their RMB swap drawings continuously, converting what was designed as short-term financing into de facto long-term balance-of-payments lending. Where the Fed’s swap lines risk enabling currency mismatches in private banking, the PBoC’s allow governments to defer structural adjustments by financing reserves with borrowed funds. The existence of swaps therefore makes restraints on banks’ reliance on short-term funding—and requirements that foreign banks hold high-quality, liquid, local-currency assets—all the more important. 

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