Deposit auctions

One-week deposit auctions are the Bank of Russia’s main operations held on a weekly basis to manage aggregate liquidity and temporarily absorb excessive funds from credit institutions under a structural liquidity surplus. Dates of the main operations are set in advance in the operation schedule for the next calendar year approved by the Bank of Russia.

In case of both a structural liquidity surplus and deficit, the Bank of Russia may decide to hold a one- to six-day fine-tuning deposit auction if the need arises to absorb bank liquidity considerably and promptly.

Information on the terms and conditions of the deposit auction is posted in the What's New section of the Bank of Russia website no later than one day before a one-week auction and on the business day of a fine-tuning auction.

Along with the general terms and conditions of deposit operations, such information includes:

  • eligible modes of document exchange;
  • bid parameters (including the maximum bidding interest rate and the maximum amount of funds placed on Bank of Russia deposits);
  • auction manner.

The information to be published the day before a deposit auction shall also cover the timing: the time when bids are accepted from credit institutions, the time when transaction conditions are agreed in the follow-up to the auction and (or) the Bank of Russia’s offsetting bids are submitted, and the time when auction results are published.

Historical information on the auction announcements is available in Statistics: Banking Sector Liquidity, Monetary Policy Instruments and Other Operations of the Bank of Russia (Deposit auction announcements).

The deposit auction procedure provides for the following modes of document exchange between the Bank of Russia and credit institutions:

  • direct document exchange with the use of Bank of Russia information resources, including personal accounts (further referred to as direct electronic document exchange);
  • document exchange with the use of software and hardware of the Thomson Reuters trading system;
  • document exchange with the use of the electronic trading system of Moscow Exchange;
  • hardcopy document exchange (if direct electronic document exchange is technically impossible).

To participate in a deposit auction, a credit institution shall submit a bid to the Bank of Russia by any convenient mode. The Bank of Russia sets the minimum bidding amount, currently each credit institution can place an unlimited number of bids.

In general, competitive bids with an indicated rate (in % p.a.) are accepted for a deposit auction. According to the Rules of deposit operations the Bank of Russia can also permit bids without an interest rate (non-competitive bids)1; these are closed in full at a weighted average rate, which forms as a result of closing competitive bids.

Pursuant to the Bank of Russia Board of Directors’ decision, the maximum interest rate deposit auction participants can bid equals the key rate. The maximum amount of funds placed on deposits at the auction (allotment amount) is determined on the basis of the banking sector liquidity forecast.

A credit institution shall have the right to withdraw its bid, if necessary, until the bidding is completed.

Deposit auctions are usually variable price auctions with a set allotment amount conducted in the American manner (competitive bids are closed at indicated prices). If necessary, a deposit auction may be conducted in the Dutch manner (bids are closed at a cut-off rate).

The Bank of Russia verifies bids placed at the deposit auction for compliance with the set requirements.

After the bidding is completed, the Bank of Russia determines the cut-off rate (maximum rate) for the set allotment amount or recognises the deposit auction as invalid. The deposit auction is recognised as invalid if there is only one participant.

As a result of a deposit auction all bids at the rate that is equal to or lower than the cut-off rate are closed. Should the demand indicated in the cut-off rate competitive bids exceed the available funds, these bids are closed pro rata.

Information on the results of a deposit auction or on the recognition of a deposit auction as invalid is posted in the What's New section of the Bank of Russia website. Historical information on the auction results is available in Statistics: Banking Sector Liquidity, Monetary Policy Instruments and Other Operations of the Bank of Russia (Deposit auction results).

A deposit transaction resulting from a deposit auction is further closed depending on the mode of document exchange chosen by the credit institution. The Bank of Russia submits offsetting bids to all credit institutions of which the bids at the deposit auction should be closed. The Bank of Russia’s offsetting bids stipulate final conditions of each deposit transaction. Credit institutions, which choose to exchange documents with the use of the Thomson Reuters trading system, should first submit their deposit applications. Credit institutions, which choose other types of document exchange, do not have to submit their deposit applications.

On the depositing day, a credit institution should forward a payment order for the transfer of funds from its correspondent account to the deposit account until the close of business.

The depositing of funds with the Bank of Russia by a credit institution as a result of a deposit auction is confirmed by a correspondent account statement.

 

1 Pursuant to the Bank of Russia’s decision, non-competitive bids have not been accepted since 26 July 2018.
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