# Central Bank Swap Lines A **central bank swap line** is a standing agreement under which one central bank lends its currency to another, taking the borrower's currency as collateral and swapping it back later. The lines that matter most are the [[Federal Reserve]]'s dollar swap lines. Banks around the world borrow and lend in dollars, and in a panic they cannot print them. The Fed can, and the swap lines are how it delivers those dollars abroad. That makes the Fed the world's lender of last resort, and it makes the list of who gets a line a statement of foreign policy. ## How a dollar swap works The Fed sends dollars to a foreign central bank and receives that bank's currency in exchange, at the overnight index swap rate plus a spread. When the term ends the trade reverses at the same exchange rate. The foreign central bank lends the dollars to its own commercial banks and carries the credit risk on those loans. The Fed's only exposure is to another central bank, secured by that bank's currency (Brookings). ## The network | Tier | Members | Status | |---|---|---| | Standing lines | [[European Central Bank]], Bank of Japan, Bank of England, Swiss National Bank, Bank of Canada | Made standing **October 31, 2013**, "in place until further notice" (Fed). Each pair of the six banks can lend each other's currencies. | | NAFTA-era lines | Bank of Canada, Banco de México | Permanent since 1994 (Brookings; CFR). | | Temporary lines, March 2020 | Australia, Brazil, Denmark, Korea, Mexico and Singapore at $60 billion each; New Zealand, Norway and Sweden at $30 billion each | Crisis lines that have since expired (Wikipedia citing the Fed; CFR). | | FIMA repo facility | Any foreign central bank holding Treasuries at the New York Fed | Opened **March 31, 2020**; made standing **July 28, 2021**, with a $60 billion limit per counterparty (Fed). Borrowers pledge their Treasuries for cash instead of selling them into a falling market. | ## Usage in two crises The swap lines are a crisis tool. Usage rises sharply in a panic and falls back once markets calm. - **2008.** The first lines opened in December 2007 with the ECB and the Swiss National Bank. Drawings peaked in **December 2008** at roughly $580 billion, about a quarter of the Fed's total assets (Brookings, "over $580 billion"; CFR, "$586 billion"; Exante Data puts the month-end figure at $554 billion). - **2020.** Drawings peaked in **late May 2020** at about $450–470 billion (Exante Data, $449 billion on May 27; Brookings, $470 billion). About 80% went to the ECB and the Bank of Japan. Japan alone peaked near $225 billion (CFR). The Fed's credit risk is small by design: the counterparty is a central bank, and the collateral is currency that bank can always create. ## Swap lines as power Access is selective. The standing network covers the euro area, Japan, Britain, Switzerland and Canada, plus Mexico. Emerging-market central banks get a line only when the Fed decides a crisis justifies one. The 2008 and 2020 rosters included Brazil, Mexico, Korea and Singapore, but not China, India or any Gulf state (CFR). A country inside the network knows its banks will get dollars in a panic. A country outside it has to build up reserves, borrow from the [[International Monetary Fund]], or turn to another lender. In 2025 the network's reliability became a political question. Reuters reported in March 2025, and again in November, that European financial-stability officials were asking whether they could count on the Fed for dollars under Trump. The concern peaked around April 2025 after the [[Liberation Day Tariffs]]. Staff-level talks explored pooling dollars held by non-US central banks as a fallback, though early analysis suggested this would be neither practical nor large enough. Fed Chair [[Jerome Powell]] told an ECB conference in July 2025 that the Fed had no plans to change how it provides dollar liquidity to official institutions. A White House spokesman said Trump had "repeatedly affirmed his commitment" to the dollar's strength (Reuters, Nov 14, 2025). Brookings noted in August 2025 that foreign officials were asking whether "the post-Powell Fed" would be as willing to lend. [[Kevin Warsh]] became chair on May 22, 2026. The reporting reviewed for this page shows no announced change to the standing lines since then. The point is not that the lines were withdrawn. They were not. The point is that allies began planning for the possibility, because the [[Mar-a-Lago Accord]] thinking in the administration treated America's public goods as something to charge for. ## The Treasury's own swap: Argentina, 2025 The largest US swap line opened in 2025 did not come from the Fed. It came from the Treasury's [[Exchange Stabilization Fund]], which needs no vote from the FOMC or from Congress. [[Scott Bessent]] announced a $20 billion swap framework with [[Javier Milei]]'s Argentina on October 9, 2025, along with direct Treasury purchases of pesos. The Exchange Stabilization Agreement with Argentina's central bank was dated October 18. Treasury's ledger shows **$2.5 billion** drawn in October 2025 and fully repaid in **December 2025**, with nothing outstanding as of August 31, 2026. Bessent announced the repayment on January 9, 2026 (Buenos Aires Times). Trump had said publicly that the support depended on Milei's party winning the October 26 election. Two differences from a Fed line stand out. The Fed lends to its peers in a crisis, by rule and in the open. The Treasury lent to one ideological ally, at the Secretary's discretion and on an explicit political condition. Argentina was also already a borrower on China's swap network. The Treasury has also used the ESF to help an ally's currency directly. On July 31, 2026 it joined Japan in buying yen, paying with euros. PIIE's Maurice Obstfeld warned that drawing on the Fed's FIMA facility to support operations like this would damage the Fed's credibility. ## The rival system: China's swap network The People's Bank of China has signed bilateral swap agreements with **more than 40 counterparties** since 2009 (CFR, tracker updated April 2026). Its lines work differently. Fed drawings jump in a crisis and are repaid quickly. PBoC lines are rolled over year after year, which CFR describes as "de facto long-term balance-of-payments lending," and they cost more and run longer. - **Argentina** drew on its PBoC line in 2014, after its July 2014 default, and again in 2023 to avoid defaulting to the IMF, paying in renminbi (CFR). - **Pakistan** has drawn every year since 2013, with drawings rising from $820 million to $4.3 billion in 2025 (CFR). - The ECB keeps a reciprocal line with the PBoC of €45 billion, or 350 billion yuan, which runs until November 2028 (Wikipedia citing the ECB). The two networks reach different kinds of countries. The Fed's lines go to rich allies with deep markets. China's go to borrowers the Fed will not lend to and the IMF lends to only on conditions. Each yuan swap line is a small piece of [[De-dollarization]] infrastructure. The 2025 Argentina deal put a US Treasury line alongside a Chinese one in the same central bank. ## See also - [[Federal Reserve]] · [[Exchange Stabilization Fund]] · [[Department of the Treasury]] · [[European Central Bank]] - [[Dollar Dominance]] · [[De-dollarization]] · [[Mar-a-Lago Accord]] · [[Secondary Sanctions]] - [[2008 Financial Crisis]] · [[COVID-19 Pandemic]] · [[Central Bank Independence]] - [[Javier Milei]] · [[China]] · [[International Monetary Fund]] · [[Global Economy Hub]]