BoE, ECB announce euro-sterling swap line to aid Ireland

The Bank of England and European Central Bank (ECB) on Friday opened a temporary euro-sterling swap line.

If requested, the Bank will provide the ECB with sterling in exchange for euro up to a limit of £10 billion ($15.5 billion).

The ECB said that the measure "allows pounds sterling to be made available to the Central Bank of Ireland as a precautionary measure, for the purpose of meeting any temporary liquidity needs of the banking system in that currency." Both the ECB and the Bank stressed that this was a "precautionary measure".

"Swap lines tend to have been used throughout the crisis to ensure that each of the central banks can provide adequate liquidity in the case of market uncertainty and capital flight," Ray Kinsella, a professor of economics at University College Dublin, told CentralBanking.com. "It's an indication that officials believe it's time to get ahead of the curve in anticipation of any major pressure of the euro."

At the height of the crisis, the Federal Reserve provided dollar swap lines to 14 central banks across the globe. The lines closed in February 2010. However, five lines were re-opened, including those with the ECB and the Bank, in May 2010. These were set to close in January 2011.