15 Mar 2010 15:50

Non-competitive bids for unsecured loans to be honored even if no competitive bids received

MOSCOW. Mar 15 (Interfax) - The Central Bank of Russia will honor non-competitive bids at unsecured loan auctions even if no competitive bids are received.

Non-competitive bids will receive loans at the minimum interest rate, according to a Central Bank instruction amending the auction procedures, which has been published on the bank's web site.

Banks can make two kinds of bids at the unsecured loan auctions: competitive, in which the interest rate is specified, and non-competitive, in which the bank is prepared to accept a loan at the weighted-average rate. The weighted-average rate is calculated based on the competitive bids.

When bids exceed the amount on offer, non-competitive bids are satisfied first.

Under the current situation, the weighted-average rate cannot be calculated if no competitive bids are received; unless the rate at which non-competitive bids are satisfied has been set in advance, the auction must be canceled.

The Central Bank has decided that non-competitive bids will be satisfied at the auction's minimum interest rate, which is announced prior to the auction.

Commercial banks that are due to repay previous unsecured loans from the Central Bank might make non-competitive bids that would be satisfied ahead of competitive bids.