CBR requests MinFin to increase total funds available to banks through deposit auctions
MOSCOW. July 31 (Interfax) - The Central Bank of Russia (CBR), in order to avoid liquidity deficits, has requested the Finance Ministry to step up and increase the allocation of temporarily idle federal budget funds to banks through deposit auctions, CBR Deputy Chairman Sergei Shvetsov told journalists on Tuesday.
Shvetsov said that the CBR is close to reaching the necessary agreements with the MinFin for this, adding that this decision would support a stable level of liquidity in the Russian banking system. "We've already started [consultations with the MinFin]. We have requested that they seriously boost credit organization's debt to the federal budget in August," he added.
He said that the main source of the liquidity deficit on the market has been the accumulation of federal budget funds in the CBR when liquidity is diluted through taxes and CBR placements. This is a seasonal factor, Shvetsov said, adding that the efforts employed by the MinFin and the CBR in 2011, when budget funds were placed in banks during the year and redeemed in December-January because of budget injections, might be utilized this year.
If the ministry supports the CBR, bank debt owed to the regulator should not increase, Shvetsov said.
According to the CBR's materials, as of July 31, 68.37 billion rubles in federal budget funds were in commercial bank deposits.
Shvetsov also said that the CBR's refinancing operations account for 60% of the coverage at the disposal of banks.
"We don't expect an increase in bank debt to the CBR if the MinFin meets with us. Therefore, we might go through the rest of the year with the utilization factor at 60%," he said.
The utilization factor for market support through REPO operations is the ratio of bank debt owed to the CBR from direct REPO auctions for all timeframes against total coverage at the disposal of banks.
According to a CBR report on the market situation for inter-dealer REPO operations in the second quarter, the utilization factor generally increased throughout the entire quarter since bank debt for REPO operation expanded faster compared to growth in the tax base. The maximum utilization factor was posted on June 18, which the figure went just over 50%.
