The Bank of England and the European Central Bank announced a new swap line agreement today. But Portugal, Greece, and Spain need not apply—it only benefits the Emerald Isle.
Specifically, the BoE/ECB agreement creates a facility for providing Ireland with up £10 billion in sterling liquidity, should the need arise.
A swap line is a mechanism for central banks to exchange currency.
The technical name—a central bank liquidity swap—makes the concept sound more difficult than it is. The idea is pretty straightforward: Two central banks agree to exchange a fixed amount of currency, while simultaneously arranging a future date to swap the currencies back, effectively unwinding the position. The central bank on the receiving end can then inject the foreign currency into its own economy. This is useful, because private firms often have payables in foreign currencies. \(In this example, firms in Ireland may owe payments in British pounds.\) You can read more about swap lines on The Federal Reserve Bank of Atlanta's blog .