Russian Central Bank sees no reason for systemic liquidity crunch
MOSCOW. July 26 (Interfax) - The Russian banking system is in no danger of experiencing a systemic liquidity shortage, the Central Bank said in a financial stability report.
"At present there are no reasons for the emergence of a systemic liquidity shortage, and the liquidity risks of the largest lending organizations are minimal," the report states.
"On the whole, at the beginning of May 2013 the banking sector had a sufficient reserve of untapped potential refinancing in order to manage possible liquidity shocks," the Central Bank said.
As of May 1, the 40 largest banks had about 1.1 trillion rubles in untapped potential refinancing secured by market assets, while untapped potential refinancing secured by nonmarket assets and guarantees was estimated at more than 2 trillion rubles.
In order to assess the liquidity situation, the Central Bank calculates so-called security utilization ratios - the ratio of banks' debt to the Central Bank on a given refinancing instrument to the total security that banks could use for refinancing with this instrument.
The Central Bank calculates two types of ratios, for utilization of market assets, which are used for refinancing through direct repo operations with the Central Bank, and utilization of nonmarket assets and guarantees, which are used for refinancing through secured Central Bank credit.
The regulator said that a number of banks could start having problems obtaining Central Bank refinancing with a utilization ratio for the banking sector of significantly less than one due to uneven distribution of security.
In the fourth quarter of 2012 and the first quarter of 2013, the main refinancing instrument for lending organizations continued to be direct repo. Lenders' debt on this instrument ranged from 0.8 trillion rubles to 2.0 trillion rubles, and the market assets utilization ratio was largely in the range of 25% to 50%.
The utilization ratio for nonmarket assets and guarantees in this period remained below the market assets utilization ratio, and was in the range of 15-35% most of the time.
The Central Bank does not rule out that interest rates on the interbank money market might climb if the utilization ratio increases.
"Theoretically, an increase in the utilization ratio could lead to growth of money market rates, since lending organizations, having exhausted the ability to raise funds secured with market assets from the Central Bank, will have greater demand for liquidity on the interbank money market," the report states.
The Central Bank also said that the possibilities for expanding the repo list with already issued paper are limited. The repo list covers about three-quarters of bond issues traded on the Moscow Exchange and nearly three quarters of the portfolio of securities owned by banks.
