On the procedure for conducting fine-tuning operations
The Bank of Russia informs of the procedure for conducting liquidity-providing fine-tuning operations which will be introduced from 3 February 2014. Simultaneously, the daily one-day REPO auctions will be cancelled (see information notice “On the System of Bank of Russia Monetary Policy Instruments”), while the one-day REPO standing facility will remain in place.
Fine-tuning operations will be conducted as REPO auctions with terms from one to six days. The minimum rate will be equal to Bank of Russia key rate. REPO operations will be conducted on Moscow Exchange and Saint-Petersburg Currency Exchange, as well as using Bloomberg information system with settlements, clearing and collateral management performed by the non-bank credit institution, the closed joint-stock company National Settlement Depository (NSD). The Bank of Russia will inform of its decision to conduct a fine-tuning auction and of the term of the operation no later than 10:00 a.m. of the auction day. The intraday timing of operations (i.e. the time when the maximum allotment is announced, bids are submitted and the cut-off rate is determined) and other parameters will be in line with the current procedure for conducting one-day REPO auctions. Specifically, settlement will take place on the day of transaction.
The Bank of Russia will decide on conducting fine-tuning operations and determine their term and maximum allotment based on the banking sector liquidity forecast. While the bulk of Bank of Russia liquidity is provided through one-week REPO auctions, the Bank of Russia will continue to monitor banking sector liquidity position and review the liquidity forecast on a daily basis. In case liquidity demand substantially exceeds its supply, the Bank of Russia will conduct fine-tuning operations. However, the liquidity needs, which arise from the insufficient use of the main one-week open market operations, will be satisfied through fine-tuning operations only partially.
Required reserve averaging and redistribution of funds in the interbank market will enable the banking sector to adapt to moderate liquidity fluctuations without resorting to Bank of Russia operations. The increase of the averaging ratio to 0.7 from 10 December 2013 has enhanced the efficiency of the required reserve averaging framework. Moreover, on the last day of required reserve maintenance period the Bank of Russia will conduct fine-tuning operations whenever liquidity demand exceeds its supply.
The Bank of Russia estimates that on average no more than two or three fine-tuning operations per month will be needed following the banks’ adaptation to the changes in the Bank of Russia monetary policy operational framework.
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