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Banks have nowhere to put the money
Material posted: Publication date: 28-10-2016
In the conditions of surplus liquidity, the Central Bank resumed the practice of short-term deposits for banks. In turn, VTB has created a new market for those who do not have the possibility of placing funds in the accounts of the regulator. However, to expect that the banks will decide to increase loans to businesses and households before the spring of 2017 is not necessary.

17 Oct 2016 VTB has announced a one-day offerings of bonds on the Moscow exchange. Daily placement of securities should help companies in need of short-term liquidity and to be able to invest for the term "overnight" unclaimed balances of rouble means of banks.

Release program short-term exchange-traded bonds, approved by the Supervisory Council of VTB, provides for the placement of securities on the Moscow stock exchange on a daily basis at pre-announced price.
Placement is carried out in every working day from 16.00 to 16.45 after the closure of the interbank lending market. Repayment occurs on the next working day at 12.00, for investors to be able to use the funds for the standard Bank payments. The benchmark level of yield on one-day bonds will be the corridor between the Deposit rate of the Bank of Russia and interbank market.

However, this "high-tech unique product," as stated in the Bank, initially not too inspired investors. The demand for one-day bonds of VTB Bank amounted to RUB 3 billion, though investors were offered 25 billion with a yield of 10.26% per annum. This, however, is quite clear: one day, bonds - new for the Russian market the tool and members it is not too clear how it works.

Earlier it was reported that the Central Bank is preparing for the fact that the shortage of liquidity at banks will soon be replaced by excess funds: the transition to the structural surplus liquidity in the banking sector is expected in the coming months, said last week the Central Bank Chairman Elvira Nabiullina. In August, banks have reduced borrowing from the Central Bank by 11% to 2.4 trillion rubles, while in 30% increase in the deposits placed in banks by the Federal Treasury, she said.

Excess liquidity is dangerous because commercial banks no longer need the funding instruments by the Central Bank and the available funds will be placed on the interbank market and deposits with the Central Bank, said the Deputy Chairman of the Board Loko Bank Andrey lyushin. In this case interest rates on loans will decline so much that significantly increase lending, but this factor is much "spin" inflation, which the Central Bank is trying to fight.

In addition, a structural surplus of liquidity means the actual loss of control by the Bank of Russia over the situation, since the conditions of excess liquidity, the regulator will not be able to affect the banking sector through rate. It is also worth considering that the free liquidity of banks with very high probability will lead to the currency market, will play against the ruble and in General can be destabilizing. In the first half of 2016, the shortage of liquidity was a major supporting factor for the Russian currency.

But from the point of view of macroeconomics and monetary policy of the Central Bank copes with excess liquidity, conducting Deposit auctions, bid at the last placement was of 9.89% per annum, says the analyst of "ALOR Broker" Alexey Antonov. On the other hand, the demand at the Deposit auction of the Treasury on the eve was nil - proposed limit of $ 500 million at an interest rate of 0.8% was not selected a single dollar. This suggests that banks having excess liquidity looking for higher profitability, but at the same time, prefer the familiar tools prefer to interact with the Central Bank.

Now comes the absorption of ruble liquidity ahead of the tax period, and the demand for rubles is big, says the expert. Further, this liquidity will still go on the interbank market, where the overnight rate will decline from today's approximately 10.3% to 9.5-10%. It will be a long time before banks decide to grant a portion of this liquidity in the form of loans to businesses and then to households. According to Antonov, given the low projections of economic growth, low oil prices, shrinking real incomes of the population it will not happen before spring of 2017, subject to positive external markets. For example, rise in price of raw materials or the lifting of sanctions.

The small demand for one-day bonds VTB is due, primarily, to the relatively low rate of involvement (10.26% at a rate of Mosprime level at 10.5-10.6% - not the same yield, which will likely be a big demand), analyst GK ТeleTrade Michael Poddubsky. With regard to the issue of excess liquidity, we still talk about sustainable surplus liquidity before and the overall level of liquidity in the banking system is heterogeneous.

A number of banks continued to experience liquidity problems, which is probably partly will be solved by the launch of new mechanisms, such as one-day bonds of VTB. To say that a large part of the excess liquidity will go to the foreign exchange market is now also rather not rational. A similar pattern is possible when the instability of the exchange rate, but in the current environment it is unlikely the dramatic increase in demand for foreign currency from banks.

Anna Koroleva


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