The MNB’s new instruments to enhance market liquidity

Three-month euro FX swaps to support domestic banks

The Magyar Nemzeti Bank is committed to enhance liquidity in the Hungarian banking sector. Accordingly, it has already introduced a number of new instruments (overnight swap facility providing euro liquidity; euro and Swiss franc liquidity-providing swap tenders; auctions to purchase government securities; two-week fixed-rate and six-month variable-rate collateralised loan tenders; reduction in the reserve ratio; broadening the range of eligible collateral to include bonds issued by local authorities). As the latest step, the Bank will provide a three-month euro FX swap tender to assist domestic credit institutions in managing their liquidity over the longer term.

In the changed global financial market environment, the Magyar Nemzeti Bank is continually striving to help domestic credit institutions’ liquidity management using the instruments at its disposal. To this end, from 9 March 2009 until withdrawal the Bank will introduce new euro-liquidity providing three-month, variable-rate EUR/HUF FX swap tenders to any amount remaining unallocated of the EUR 5 billion assigned to the purpose of its six-month EUR/HUF FX swap tenders.

All domestic credit institutions fulfilling the technical requirements will be allowed to participate in the Bank’s three-month EUR/HUF FX swap tenders.

The Bank will hold the euro liquidity-providing variable-rate three-month EUR/HUF FX swap tenders on the first trading day of the week, announcing a minimum implied euro interest rate (expressed in maximum swap points) and a maximum allotment amount. The Bank will decide on the acceptance of bids by listing them in diminishing order of offered interest rates. The required minimum implied euro interest rate in the euro liquidity-providing variable-rate three-month EUR/HUF FX swap tenders will be at least 50 basis points higher than the fixed implied euro interest rate applied in six-month EUR/HUF FX swap tenders.

The first tender will be held on 9 March 2009, with a maximum allotment amount of EUR 100 million.

The detailed conditions for participating in euro liquidity-providing variable-rate three-month EUR/HUF FX swap tenders are available at:

http://english.mnb.hu/engine.aspx?page=mnben_eszkoztar_tenderek

Vissza a tetejére

The primary objective of the MNB shall be to achieve and maintain price stability. (...) Without prejudice to its primary objective, the MNB shall support the maintenance of the stability of the system of financial intermediation, the enhancement of its resilience, its sustainable contribution to economic growth; furthermore, the MNB shall support the government’s economic policy and its policy related to environmental sustainability, using instruments at its disposal.