Andorra Banks Gain Access to €50B ECB Liquidity via New EUREP Facility

Andorra's Financial Authority (AFA) has received government approval for legislative changes enabling access to external euro liquidity mechanisms, including the ECB's Eurosystem Repo Facility for Central Banks (EUREP), to support the country's banking system.

The reforms amend the AFA's governing law and international reserves regulations, allowing the authority to operate with the Eurosystem and eurozone central banks. This includes signing agreements, opening accounts, and using necessary infrastructures for liquidity operations. Banks can provide high-quality financial assets as collateral, which the AFA would mobilize to obtain funds and channel back to eligible Andorran institutions.

Finance Minister Ramon Lladós described the changes as part of six years of efforts to strengthen the financial system, including Andorra's entry into the International Monetary Fund and establishment of reserves. He highlighted the robustness of local banks' balance sheets and said the measures enhance competitiveness and resilience.

The EUREP access complements existing internal tools without replacing them. It builds on the 2022 urgent liquidity assistance mechanism backed by Andorra's €250 million in international reserves, deposited with the central banks of Spain, France, and the Netherlands, plus a €35 million ECB credit line from the Covid-19 period. These reserves remain unchanged at €250 million and are kept separate from any external funds, which would follow specific agreement terms.

Previously, liquidity support was limited to around €285 million due to reliance on national reserves. Under EUREP, available funds would scale with collateral from banks, such as European sovereign bonds, rather than state holdings. Lladós noted the state bears no operational risks, as guarantees come directly from bank assets.

The €50 billion ECB liquidity pool forms part of a wider tool for non-eurozone authorities, with Andorra's share depending on eligible collateral. The bill is expected to reach the General Council soon for final approval. Andorra uses the euro under its monetary agreement with the EU but lacks a central bank or direct access to standard Eurosystem policies.