MNB to phase out two-week deposits by end-April


Photo by Jessica Fejos

The National Bank of Hungary (MNB) will phase out its two-week deposit facility, earlier its main instrument for sterilizing banking sector liquidity, by the end of April, the central bank said today, according to Hungarian news agency MTI.

(Photo: Jessica Fejos)

The MNB replaced the two-week deposits with a three-month, fixed-rate deposit last September but gave no timeframe for phasing out the former.

The MNB said today that its policy makers had decided to gradually terminate the two-week deposit “to ease monetary conditions and provide an additional boost to the Self-Financing Program”, a scheme that aims to draw banking sector liquidity out of central bank facilities and into government securities.

Adjusting to the change is likely to result in banksʼ purchase of HUF 400-800 billion in government securities, it added.

The current HUF 1 trillion maximum allotment for the two-week deposits will remain in place until the end of March, after which time it will be gradually reduced to zero by the end of April.

The MNB also said it would raise the amounts by one-fifth at interest rate swap (IRS) tenders it launched in the summer of 2014.  

The IRS tenders were introduced with the aim of boosting banksʼ incentives to buy government securities.

The MNB noted that, since the tenders were introduced, IRS transactions worth more than HUF 1.3 tln had been made and that banksʼ holdings of government securities had risen by over HUF 2 tln.

The demand by banks for government securities that the measures are likely to produce could drive down long-term government securities yields further, resulting in looser monetary conditions at the long end of the yield curve, the MNB said. The MNBʼs balance sheet and sterilization stock is expected to be reduced further, while efficiency improves and turnover increases on the interbank market.

"With the termination of the two-week instrument after 17 years, the reform of the [MNBʼs] instruments will be completed and an optimal set of monetary policy instruments will develop, corresponding to the current size and structure of the Bankʼs balance sheet," the central bank said.

Paks II Work 'Rumbling Ahead,' Says Szijjártó Power

Paks II Work 'Rumbling Ahead,' Says Szijjártó

Hungary to Host Next EPC Summit Int’l Relations

Hungary to Host Next EPC Summit

New Tenants at Academia Offices Office Market

New Tenants at Academia Offices

Visitor Numbers, Guest Nights Climb in H1 Tourism

Visitor Numbers, Guest Nights Climb in H1


Producing journalism that is worthy of the name is a costly business. For 27 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.
Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.