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Free liquidity of banking system rises slightly in October

The free liquidity of Hungary's banking sector rose slightly in October after barely changing in the previous five months. Rising liquidity was reflected by the higher stock of two-week National Bank of Hungary (MNB) bonds and especially by the increase of one-day central bank deposits of banks, and was due a drop in the stock of outstanding foreign exchange swaps with the MNB, the bank said.

The average stock of outstanding two-week MNB zero-coupon bonds, the bank's main liquidity-management instrument, rose HUF 15 billion to HUF 4,057 billion in October after rising HUF 173 billion in September. The average stock of the bonds, which are the MNB's main liquidity instrument, peaked at HUF 4,454 billion in April, fell to below HUF 3,800 billion in July and has risen again since then.

The average stock of the O/N deposits rose 57 billion to HUF 193 billion last month after declines in the previous two months. The stock, which jumped from below HUF 100 billion levels with the 2008 autumn crisis to peak at around HUF 800 billion-900 billion late 2008 and in the first months of 2009, dropped to below HUF 200 billion for most of the past 12 months except for June and July.

The average stock of forex swaps decreased by HUF 164 billion to HUF 236 billion in October after peaking at slightly over HUF 460 billion in July and August. The stock of the swaps, launched to ease a liquidity shortage late 2008 and early 2009 rose until HUF 362 billion in January 2010, dropped to HUF 87 billion in May but rose sharply both in June and July.

The average deposits of the central government with the National Bank fell a sharp HUF 287 billion to HUF 1,060 billion in October. Part of the decline could be seasonal before the large tax receipts due in December, and drop also reflected big domestic bond and T-bill expiries. The stock dropped to its lowest level this year and matched its level a year earlier.

The MNB's average stock of external assets dropped a sharp HUF 677 billion after a HUF 83 billion rise in September, to HUF 9,429 billion. Except for minor drops, the bank's external assets has been on a rising trend since May 2009. The average stock of external liabilities fell less, by HUF 184 billion to HUF 1,102 billion. External liabilities peaked at HUF 1,378 billion in August. Part of the October drops could have reflected the repayment of a EUR 1 billion foreign bond by the Hungarian state on September 27.

The average current account balance of the banking sector with the MNB only slightly deviated from its mandatory reserve requirements, with excess reserves amounting to HUF 0.9 billion, the same as in September.

Average cash in circulation dropped a slight HUF 21 billion in October to HUF 2,335 billion after no change in September and a small rise in August. The drop was the second decline this year after a similar-size drop in March. (MTI – Econews)