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Forint liquidity of banks rose slightly in March

Forint liquidity of the banking sector rose slightly in March relative to the previous month as central bank FX swaps and the currency in circulation declined, the preliminary statistical balance sheet of the National Bank of Hungary (MNB) showed on Thursday.

In March, forint liquidity of the banking sector rose slightly from February, as reflected in an increase in average holdings of two-week MNB bills. That was partly offset by a decline in credit institutions’ overnight deposits, by HUF 32.9 billion to HUF 204.3 billion

Resident and non-resident holdings of two-week MNB bills rose slightly relative to the previous month. Resident bills holdings grew HUF 57.4 billion to HUF 3,325.6 billion while non-resident holding went up HUF 49.1 billion to HUF 477.8 billion. 

The increase in forint liquidity was mainly accounted for by the decline in FX swap claims of the central
 bank against credit institutions, and a fall in currency in circulation also contributed to the increase of liquidity. 

The March average of swaps related to early repayments of foreign currency debt amounted to HUF 15.1 billion after HUF 149.8 billion in February. The early repayment scheme ended with February.

The decline in the average stock of external assets reflected the repayment of an IMF loan in the previous month and payments to credit institutions of foreign currency allotted in euro sale tenders related to early repayments.

The MNB had conducted euro sale tenders related to the early repayment program on a weekly basis since 3 October 2011. The program ended on 27 February 2012. A total of HUF 810 billion was sold to credit institutions in euro sale tenders, of which HUF 781 billion was paid out in relation to actual early repayments. 

The MNB converted into forint the HUF 29 billion equivalent of euros allotted to credit institutions in the tenders with a value date of 12 March. During March, a similar amount, HUF 29 billion, was paid out on the basis of early repayments effected at the end of February, which reduced credit institutions’ forint liquidity.