The foreign currency allocated on Monday is nearly one-third of the combined €3 bln total the MNB Monetary Council decided late September to allocate from the central bank international reserves to cover banks’ FX demand related to the settlement of the refunds. The MNB programme announced in September consists of two FX tender facilities to be operated weekly, or more frequently if necessary, starting October 13, 2014 and lasting at least until the end of March 2015.
Monday’s demand focused on the unconditional facility which, from the banks’ perspective, is the combination of a spot euro purchase and an opposite-direction multi-currency interest rate swap (CIRS) expiring in 2016 or 2017. The MNB alloted €750m in the unconditional facility on Monday. It had earmarked a total of €1 bln of its reserves for the facility in September.
Monday’s bids and allotment totalled €230m in the conditional facility for which the MNB had allocated a total of €2 bln. In the conditional facility, banks can buy spot euros from the MNB, with the euros bought rolled over in opposite-direction one-week FX swaps at the MNB until the euro is actually used in the settlement of the refunds. The condition is that banks reduce their short-term external debt by 50% of the euros actually used.
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