Banking sector liquidity rises in January

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Forint liquidity of Hungaryʼs banking sector rose in January from a month earlier as the average stock of banksʼ one-day deposits with the National Bank of Hungary (MNB) rose sharply while their three-month and other deposits fell slightly, the MNB said in a report Monday based on preliminary data of its statistical balance sheet, Hungarian news agency MTI reported.

The average stock of banksʼ one-day deposits rose a spectacular HUF 273.8 billion from December to HUF 872.2 bln in January, the highest level since January 2008, from when MNB data are available. At the same time, the average stock of their three-month deposits fell HUF 29.4 bln to HUF 894.3 bln.

The steep rise and the high average stock indicate that banks used the MNBʼs one-day deposits as a tool of liquidity management far more extensively in January than earlier. The MNB has limited the available volume of three-month deposits - previously its key liquidity management instrument - since October 2016, in order to squeeze money out of the central bank to banks. 

The three-month deposits pay the MNB base rate of 0.9% at present. Keeping money in MNB one-day deposits is, by contrast, a cost to banks, as the deposits carry interest of minus 0.05%.

Banks still owed the central bank HUF 334.4 bln on FX swaps, in which they bought foreign currency for the settlement and conversion of FX loans in 2014 and 2015. The average stock fell HUF 127 bln from December. 

Meanwhile, the average stock of banksʼ one and three-month loans owed to the MNB fell by a further HUF 38.4 bln to HUF 16.1 bln.

The average stock of the MNBʼs external liabilities fell HUF 32.4 bln to HUF 878.7 bln in January.

The average stock of external assets rose HUF 89.4 bln in a month to HUF 8.3698 trillion. The moderate rise reflected the arrival of European Union transfers to Hungary in January, the MNB said, adding that at the same time, the strengthening of the forint and the drop in the average stock of FX swaps providing forint liquidity reduced external assets. The MNB introduced these swaps as part of its new set of forint liquidity fine-tuning instruments in late October 2016.

The average stock of central government deposits with the central bank rose a moderate HUF 22.2 bln from December to HUF 1.4808 tln in January. The average stock dropped HUF 320 bln in December, in the regular year-end drop as the government aims to meet the Hungarian and EU requirement of keeping year-end state debt on a falling trend.

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