2012-04-17
The Bank of Lithuania: additional liquidity management tools are no longer needed
After deposit flows in the banking system returned to the usual level and the distribution of liquid reserves among banks became much more even, this week the Bank of Lithuania will discontinue the execution of the auctions of deposits, debt securities purchase and repurchase transactions.
These usual open market operations gave commercial banks additional capabilities to use their assets and manage their money flows in a more optimal manner. The demand for such tools in the market became evident after the suspension of operations of AB bankas SNORAS and the beginning of payment of deposit insurance compensations soon thereafter.
Currently, when the major share of insurance compensations to AB bankas SNORAS depositors has been already paid and smoothly distributed within the banking system, whereas the fluctuations of liquid reserves returned to the usual level, the additional liquidity management possibilities are not so relevant any longer.
“Active participation of banks in the auctions at the end of last year and in the beginning of this year showed that the tools offered by the Bank of Lithuania were necessary for the market; however, the current situation in the domestic market allows returning to the use of banking system liquidity management tools based on self-regulation only – interbank transactions and anchor currency purchase and sale. The Bank of Lithuania is ready to utilise the available monetary policy instruments again in the future, if needed”, said Mr. Darius Petrauskas, Member of the Board of the Bank of Lithuania.
The Bank of Lithuania conducted open market operations (auctions of term deposits, debt securities purchase and repurchase transactions) from 19 December 2011.
The volume of deposit auctions, which amounted to LTL 900 million per week in January, declined gradually to LTL 42 million in the last auction, which took place on 10 April. Over the whole period of conducting the auctions, the average amount of accepted 7-day maturity deposits made up LTL 424 million.
In debt securities auctions, the Bank of Lithuania purchased securities of various maturities for the nominal value of LTL 248.6 million from commercial banks operating in the country.
7-day maturity securities repurchase transactions were concluded in 4 auctions, whereas their volumes ranged from LTL 100 thousand to LTL 10 million.