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Forint liquidity of Hungary banks falls on repayment scheme

MNB

Similar to the previous two months, forint liquidity of Hungary's banking sector fell in February from a month earlier mainly to the forint paid for the euros purchased by banks at the National Bank of Hungary's (MNB) euro tenders held to support an early repayment scheme, and also as a result of an increase in the stock of banks' central bank forex swaps, the National Bank of Hungary said in its preliminary statistical balance sheet published on Monday.

The decline in liquidity was evidenced in a significant drop of banks' average stock of one-day central bank deposits. The drop was only slightly counter-balanced by a moderate rise in the average holdings of two-week zero-coupon MNB bonds, the bank said.

MNB accepted €335 million or HUF 99 billion worth bids by banks to buy euros at its euro sale tenders in February, and sold €921 million, worth HUF 279 billion to banks in the month, the last month of the early repayment scheme, the bank figures show.

Average liabilities of the MNB to banks in the form of FX swaps on euros sold but yet not disbursed at the MNB tenders related to early repayments fell HUF 112.2 billion from January to HUF 149.8 billion as the scheme neared its end.

In addition to the above swaps, the average stock of central bank FX swaps outstanding rose HUF 55.1 billion to HUF 561.4 billion.

Retail borrowers had the option to fully repay early their FX mortgages at fixed preferential exchange rate between the end of September and the end of February under the scheme. The MNB started selling banks euros for forints at weekly tenders at the beginning of October, aiming to give lenders the necessary FX liquidity for the scheme.

The MNB figures show residents raised their average holdings of the two-week MNB bonds by HUF 24.2 billion to HUF 3,268.2 billion after a steep reduction in January. Non-residents continued to increase their average MNB bond holdings last month; the increase of HUF 38.5 billion was about a third of the increase in January. Their average holdings rose to HUF 477.8 billion. After steady increases since August, in December and January residents reduced their holdings steeply while non-residents bought the bonds after sales since August.

Credit institutions' one-day deposits with the MNB averaged HUF 238.2 billion in February, dropping a steep HUF 359.1 billion from the previous month. The deposits dropped moderately in January after falling a steep HUF 420.4 billion rise in December.

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