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Surplus liquidity of Hungary banking sector edges up in November

Surplus liquidity of Hungary’s banking sector edged up in November from a month earlier as evidenced in an increase in average holdings of two-week National Bank of Hungary (MNB) bills, the central bank’s main instrument for soaking up liquidity, the MNB’s preliminary statistical balance sheet published Monday shows.

Average monthly holdings of two-week MNB bills held by residents increased by HUF 64.9bn to HUF 4,087.9bn in November from the previous month. Average monthly holdings by non-residents rose HUF 87.2bn to HUF 307.6bn.

On the assets side, external assets climbed HUF 144.6bn to HUF 11,733.0bn.

The increase in forint liquidity was mainly the result of a decline in deposits of the central government and a fall in MNB three-month spots, the MNB said. This was partly offset by a rise in currency in circulation, which is usual in the period leading up to Christmas, it added.

A €1bn foreign bond matured on October 28, causing a significant decline in the monthly average of external assets and deposits of the central government in November, but the effect of this on external assets was fully offset by the depreciation of the forint, the MNB said. Consequently, the stock of external assets and other liabilities rose both in terms of the monthly average and the end-of-month balance sheet, it added.

A repayment due on November 29 on a loan Hungary received from the European Commission at the height of the crisis in 2008 reduced foreign exchange reserves by €2bn, affecting mainly end-of-month stock of external assets, the central bank said.

Deposits of the central government fell by HUF 386.9bn to HUF 1,647.5bn in November from the previous month.

The MNB said it accepted €320m in offers in euro tenders supporting liquidity necessary for an early foreign currency-denominated mortgage repayment scheme in November but actually allocated €291m because settlement takes place only when the loans are repaid.

The MNB launched the series of weekly euro-for-forint tenders early in October, just after the government scheme was launched. Under the scheme, borrowers may repay, in full, forex mortgages at a discounted exchange rate, with banks covering the difference.

Since the tenders were launched until the end of November, the MNB accepted a combined €1.21bn of offers and allocated €526m.