Currency Swap Line
a.k.a. Central bank swap line, Swap line
An agreement between two central banks to swap currencies, so each can lend the other's currency to its…
In plain English
An agreement between two central banks to swap currencies, so each can lend the other's currency to its own banks in a pinch.
In a crisis, banks around the world can run short of dollars. A swap line lets, say, the European Central Bank swap euros for dollars with the Fed and then lend those dollars to European banks.
Swap lines were used heavily in 2008 and 2020 to calm global funding panics. Announcements of new or expanded lines signal that central banks are acting to stop a dollar shortage.
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