The Central Bank will limit the pressure of currency speculators for the ruble


In April and may of this year the Bank of Russia in limited amounts sold Federal loan bonds (OFZ) from its own portfolio in the stock market, reported the press service of the Central Bank. These operations, the Central Bank used to regulate liquidity in the banking sector.

In the banking sector excess liquidity, says chief economist at FG BCS Vladimir Tikhomirov. This is evident in the rates of the interbank market, which fell below the key rate. The banks are facing the problem of how to place excess liquidity, because the demand of borrowers for loans remains sluggish, says Tikhomirov. TSB selling OFZ on the market, on the one hand, provides a tool for the allocation of funds to the banks; and on the other hand, does not allow the flow of liquidity in the foreign exchange market for speculation on the ruble and the dollar”, – says the economist.

Usually, the Central Bank regulates the liquidity of the banking sector through REPO and loans at non-market assets and Deposit auctions, says chief economist for Russia and CIS “Renaissance Capital” Oleg Kuzmin. Selling OFZ is an option, he adds.

The situation when the banking system’s surplus liquidity are concerned about the Bank of Russia, Kuzmin said. “With surplus rates in the market decline below the key, and therefore regardless of the desire of the Central Bank monetary policy beginning to wear off he might become a threat to the inflation target”, he explains.

According to estimates of the Ministry of Finance and the Bank of Russia, the banking sector may move from the state structural deficit of liquidity in a situation of surplus in the second half. However, the Minister of economic development Alexei Ulyukayev, who previously oversaw the monetary policy of the Central Bank, said that the surplus liquidity has been observed since February.

“Structural surplus reduces some risks but creates new ones. Banks reduce the volumes of refinancing in the Central Bank, together with the leaves on the second plan the problem of shortage of financial support. However, the improved liquidity situation could trigger excessive interest of banks to risky lending and the purchase of risky assets. The Bank of Russia will follow”, – said the head of the Central Bank Elvira Nabiullina at the Congress of the Association of Russian banks in April (quoted by “Vedomosti”).

In addition, the transition of the banking sector structural liquidity deficit to surplus could have a negative impact on the ruble, said earlier the Director of the Department of studies and forecasting of the Central Bank Alexander Morozov.

Operations with securities on the open market are one of the traditional instruments of monetary policy of Central banks in the world, is celebrated in response to the press-service of the Central Bank. However, in Russia such a tool has not been used in recent years, say economists surveyed. “Such problems as the excess liquidity that was not there before. Before the crisis of 2008, the economy was growing, after there was a huge demand for currency and the Central Bank actively spending reserves, and the need to use the tools of sterilisation of liquidity was not”, – said Tikhomirov. Now the situation has changed, he adds: “Previously largely liquidity was regulated through the course of the ruble. Now the Central Bank is not on the foreign exchange market and market participants do not speculate”.

Selling assets on the open market — a clear and effective tool, says Tikhomirov. However, it is able only to stabilize the situation at an acceptable level, not to fix it. “The reason for the excess liquidity lies in the state of the economy. Demand is weak: people and companies are trying not to increase the debt burden that affects the financial sector,” he explains. Change the situation can further lower rates on loans, which will stimulate demand.