Banking. Central Bank open market operations (most important)

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Banking. Central Bank open market operations (most important)

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Topic 5. Operations of the Central Bank on the open market

The open market policy is the sale and purchase of government securities by the central bank in order to influence the money market. The Central Bank, by selling state securities to commercial banks (CB), limits the credit expansion of the CB, reduces the money supply in circulation, thereby easing the pressure of means of payment on the commodity market and increases the ruble exchange rate. When selling or buying securities The Central Bank is trying to influence the volume of liquid funds k.b. by offering favorable interest. and thereby manage their credit emission. Buying securities on the open market, he increases the reserves of c.b. and increases the money supply. This is used especially effectively during a crisis during a period of high market conditions, the Central Bank offers to buy a bank. central bank in order to reduce their credit opportunities in relation to the economy and the population. The Central Bank can pursue this policy in two ways: 1. it can open the volume of purchase and sale, the level of interest rates at which banks can buy securities. Selling rate of securities set according to their duration. In this case, the impact on the formation of market rates will be indirect. 2. The Central Bank can set interest rates at which it is ready to buy securities.

The success of an open market policy depends on many factors. Banks acquire securities. from the Central Bank only when there is little demand for loans from entrepreneurs and the public, and also when the Central Bank offers securities on more favorable terms. When it is necessary to maintain liquidity and credit activity of a commercial bank (c.b.), the Central Bank acts as a buyer on the open market. In this case, repurchase agreements are used (when the Central Bank undertakes to buy securities from securities with the condition that the latter carry out the reverse process after a while, but at a REPO discount. This discount can be fixed or floating.

State securities market during 96-98 years. exerted a decisive influence on the state of the Russian financial market and acted as the main instrument of the Central Bank's monetary policy. This was determined by the wide presence of non-residents on it, they accounted for 32% of the GKO-OFZ in circulation. Non-residents ensured a massive influx of foreign exchange funds to the GKO-OFZ market, which stimulated the decline in government bond yields. On the other hand, the international financial market began to influence the Russian market and contributed to its crisis. A characteristic feature of the state securities market. in 98 was a consistent change in quotations. The yield of the GKO portfolio (government short-term bonds) increased from 33% to 71%. And the Ministry of Finance carried out their repayment with the help of the federal budget. The Ministry of Finance carried out a restructuring - a voluntary exchange of GKOs for Eurobonds with a maturity of 7-20 years, and also refused to issue GKOs, but the market did not recover radically and trading stopped in August. The Central Bank faced the task of developing a mechanism for restoring the financial market, since open market operations are an important element in regulating the liquidity of the banking system. The Central Bank offered its own short-term zero-coupon bonds of Russia - OBR up to 3 years. The Central Bank provided the CB with the opportunity to use them as collateral for pawn loans and overdraft loans. At the stage of financial market recovery, the importance of the regulatory activities of the Central Bank increases. The position of the market of currency government securities is improving. Now the sector of corporate debt obligations is activated - mortgage-backed bonds, commercial bills, etc., which allows the overflow of state securities. into corporate.

Authors: Shevchuk D.A., Shevchuk V.A.

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