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Banks' free liquidity rises further in April

Hungarian banks' surplus liquidity rose further in April as a fall in their average stock of overnight deposits was more than offset by a rise in their two-week central bank (MNB) bond holdings.

Despite a steep fall between the end of March and April, the average stock of the central government’s deposits also rose from April, a report on the preliminary statistical balance of the National Bank of Hungary (MNB) shows.

Outstanding swaps with the MNB also rose, the bank said. The stock of two-week covered central bank loans remained unchanged and the stock of six-month covered loans dropped from March. The MNB has introduced various FX swap and covered loan facilities since last autumn to ease a foreign currency liquidity squeeze because of the financial crisis.

The average stock of credit institutions' overnight deposits fell HUF 160 billion from March to HUF 649 billion in April. At the same time, banks increased their average holdings of two-week zero-coupon MNB bonds by HUF 540 billion to a record HUF 2,079 billion. The rise in the stock of two-week bonds came after a fall in March.

The central government withdrew HUF 973 billion from its deposits held with the central bank in April, the MNB figures show. The bulk of the deposit drop was in the central government's foreign currency deposits, the forint value of which fell HUF 943 billion to HUF 1,189 billion.

Most of the central government's foreign currency deposits are the disbursed but unused part of a international credit line granted to Hungary by the IMF, the EU and the World Bank in autumn. The government has been using the international credit line to finance the budget deficit and expiring debt, as well as grant loans to banks in order to facilitate domestic lending.

Central government deposits dropped HUF 1,091 billion to HUF 1,716 billion from the end of March to the end of April, due to the aforementioned withdrawal and a HUF 117 billion decrease in their forint value, most likely due to the forint's strengthening. Based on average figures, however, the stock of central government deposits with the MNB rose HUF 237 billion to HUF 2,007 billion.

The average of the banking sector's current account balances rose HUF 8 billion from March to HUF 352.8 billion, reflecting a continued moderate rise in liabilities under reserve obligation since January. The reserves dropped sharply in December after a cut in the mandatory reserve rate from 5% to 2% took effect. The average stock exceeded the reserve requirement by a slight HUF 1.3 billion. The report noted that overnight interbank lending rates were close to the bottom of the interest rate corridor throughout April.

The average stock of currency in circulation rose a slight HUF 15.3 billion in April to HUF 2,351 billion.

On the assets side, the forint value average of the MNB foreign assets increased HUF 422 billion, despite a strengthening forint, to HUF 8,043.3 billion in April. (MTI – Econews)