HUF liquidity of the banking sector declined m/m in March, according to data from the National Bank of Hungary (NBH) balance sheet. The average stock of banks’ overnight and other deposits in the NBH fell m/m during the month while the stock of three-month deposits was flat at HUF75bn, in line with the unchanged ceiling on the NBH’s main instrument since end-2017. Excess reserves of banks amounted to HUF27.2bn and were almost unchanged m/m. They remained elevated compared to usual levels but we think banks might have directed their spare cash towards government securities, judging by high demand on the recent primary auctions in April. The total reserve requirement of the banking sector was HUF207bn on average in March.
External assets of the NBH rose by 0.8% m/m to HUF7,865bn on average in March. The increase in the average stock of external assets was due to the depreciation of the forint exchange rate during the month, the NBH said. Transfers from the EC, likely representing EU funds, also lifted the end-of-month external asset stock, it added. The EU fund reimbursements likely also supported a 7.6% m/m increase in the average stock of central government deposits in the NBH, which reached HUF720.7bn in March.