The stock of the National Bank of Hungary’s (NBH) main monetary instrument, the three-month deposit, dropped by HUF590.9bn m/m to HUF1,174.2bn at end-October, NBH balance sheet data showed. As we reported, the NBH put a ceiling of HUF 900bn on the three-month deposit stock for end-2016 and the speed of the adjustment to the limit showed that the NBH targeted swifter loosening of monetary conditions, in our view. In addition, the NBH introduced forint liquidity swap tenders during the month and their outstanding stock amounted to HUF122.4bn on average in October, the data showed.
Excess reserves of banks declined to HUF7.8bn on average during the month, which the NBH attributed to the change of the interest rate on excess reserves to the overnight rate minus 15bps. This encouraged banks to park their excess liquidity in overnight deposits, the NBH said. Banks’ overnight deposits consequently rose in October while current account balances fell, which overall translated into lower forint liquidity of the banking sector, the NBH commented. Total reserve requirement for banks amounted to HUF347.4bn for October.
The average stock of the NBH external assets fell by 0.5% m/m to HUF8.075.0bn in October. In terms of end-period stocks, external assets increased noticeably, which was attributed to EU fund inflows as well as the start of the forint liquidity swap tenders. The impact of these two factors on reserves was partly offset by the expiration of EUR500m of the government’s premium euro-denominated bonds during the month.