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Forint liquidity of banking sector down in April

Forint liquidity of the Hungarian banking sector fell in April, reflected mainly in a decrease in the average stock of lendersʼ overnight deposits, the National Bank of Hungary (MNB) said in a monthly report on Tuesday, state news wire MTI reported.

The average stock of banksʼ overnight deposits stood at HUF 711.8 bln in April, down HUF 64.7 bln from the previous month. The stock includes the central bankʼs preferential deposits, which stood at HUF 26.1 bln in April, more than doubling from March.

The preferential deposits are O/N deposits currently available to banks up to the value of their refinancing loans from the MNB under the Funding for Growth Scheme fix (FGS fix). The central bank currently pays banks -0.05% on their O/N deposits, while it pays the base rate, 0.90%, on the preferential deposits. 

The average stock of the MNBʼs FX swaps providing forint liquidity dropped HUF 27.5 bln to nearly HUF 1.932 trillion, after staying practically unchanged since June 2018. The drop came after the MNB Monetary Council decided on March 26 to reduce the amount of liquidity to be crowded out from central bank instruments to "at least" HUF 300-500 bln in Q2, from HUF 400-600 bln in Q1.

The O/N interbank interest rate stayed at the bottom of the interest rate corridor throughout the month. The bottom is the O/N central bank deposit rate, which was raised from -0.15% to -0.05% as of March 27.

The monthly average of the banking sectorʼs current account balances with the MNB exceeded their HUF 225.6 bln reserve requirements by HUF 31.4 bln in April, slightly more than in March, the MNB said.

Average foreign assets rose mainly on exchange rate changes from March, while they dropped in an end-of-month comparison due to transactions.