Treasury operations not at odds with monetary policy - Central Bank
MOSCOW. Sept 9 (Interfax) - The Treasury's placement of budget funds at banks is not at odds with Central Bank monetary policy, the Central Bank said in a report.
A host of analysts have noted that at the same time the Central Bank is trying to soak up as much excess liquidity as possible from the system, the Treasury is providing relatively cheap money in deposit operations.
In August the flow of liquidity into the banking sector was facilitated by the reduction in the amount of cash in circulation and use of Reserve Fund money to finance current budget spending. A total of 0.4 trillion rubles from the Reserve Fund was converted.
"Until budget resources were spent, the Treasury placed the bulk of this money in bank deposits and in repo deals. The parameters of the Treasury operations were agreed with the Central Bank and were not at odds with the monetary policy being conducted," the Central Bank report said.
The Central Bank, in its recommendation for the Treasury concerning the minimal interest rates on the deposits, reckoned that required reserves ought to be higher when banks take budget funds on deposit as opposed to money raised from the Central Bank or other commercial banks.
"Given the current required reserves standards, the imputed cost to banks from inclusion of budget funds among reserve liabilities is roughly 50 basis points. In other words, the actual cost of raising budget funds for the banks is not less than 10.5% annually, which corresponds with the level of the Central Bank's key rate," the Central Bank said.