Forint liquidity of the banking sector increased m/m in September, the National Bank of Hungary (NBH) said with the publication of its balance sheet data for the month. Banks’ overnight deposits at the NBH increased significantly, which was only partly offset by a small decline in banks’ other deposits. We think this might be partly reflected by a carry-over effect from the expansion of the forint-liquidity swap stock of the NBH in the previous month. The average stock of the swap portfolio increased by HUF194.6bn m/m to HUF2,077.8bn in September as a result of the gradual expansion on the weekly tenders in August.
Banks maintained 63.3bn of excess reserves in September, which was a relatively high level. Excess reserves have permanently remained high, which we believe might be due to the financial transaction tax and related increase in cash holdings. The total reserve requirement of the banking sector amounted to HUF227.2bn in September.
External assets of the NBH reached HUF10,205.0bn on average in September and increased by 4.5% m/m. The increase was due to a carry-over effect from the previous month as well as the depreciation of the forint in September, the NBH said. EU fund reimbursements also boosted the external assets’ level during the month. On the other hand, the end-of-month stock of external assets was down m/m, which the NBH attributed to maturities and redemptions of forex currency bonds issued by the government. This likely referred to the domestic EUR-denominated premium bonds with an outstanding amount of EUR192.9m as of end-2018.