Standing lending facilities

The Bank of Russia extends intraday loans; they allow not only speeding up payments and smoothing operation of the payment system but also play an important role in banking sector liquidity management. They save credit institutions creating an extra liquidity cushion to even out mismatches in debits and credits on their correspondent accounts with the Bank of Russia.

Bank of Russia intraday loans are extended automatically on a credit institution’s correspondent account. A credit institution does not have to file any applications to the Bank of Russia to obtain such loans. Should a credit institution have insufficient funds for the next payment, such payment is made from an intraday loan (crediting the correspondent account with the Bank of Russia) within the set limit on intraday and overnight loans. Intraday loans secured either by marketable assets or credit claims are extended per correspondent account.

Interest on Bank of Russia intraday loans is not accrued; neither is a service fee charged.

Intraday loans are repaid from cash inflows on the respective correspondent account of a credit institution during the transaction day. Should a credit institution have an outstanding intraday loan by close of business, it automatically obtains an overnight loan for its repayment.

Maximum limits on intraday and overnight loans for correspondent accounts are set upon the conclusion of a Loan Participation Agreement or when a new account is included in such an agreement. They may be subsequently revised on the initiative of the credit institution or the Bank of Russia. The total amount of intraday and overnight loan limits a credit institution may distribute between its accounts should not exceed the credit institution’s capital.

The Bank of Russia establishes intraday and overnight loan limits every business day, taking into account available collateral in compliance with requirements of Chapter 16 of the Terms and Conditions for the Issue and Redemption of Bank of Russia Loans Backed by Securities or Credit Claims.

A credit institution’s capability to use the set limits on intraday and overnight loans can be suspended in cases stipulated in Chapter 7 of the Terms and Conditions for the Issue and Redemption of Bank of Russia Loans Backed by Securities or Credit Claims or Bank of Russia regulations on the Bank of Russia payment system.

The Bank of Russia issues standing lending facilities, other than the above-mentioned automatically extended intraday and overnight loans, upon credit institutions’ application.

Overnight loans and other one-day secured loans extended on the application day are standing facilities with two objectives. First, the fixed interest rate on such loans provides a ceiling for the overnight money market interest rates and is set to limit their volatility. Second, these facilities allow credit institutions which for some reason have failed to borrow funds in the money market, to obtain overnight liquidity from the Bank of Russia against securities or credit claims.

Interest rates on overnight loans and other one-day standing lending facilities equal the key rate increased by one percentage point.

Credit institutions may also apply to the Bank of Russia for standing lending facilities for more than one day. Interest rates on such facilities equal the key rate increased by 1.75 percentage points. These are floating rates, that is, rates on extended loans change every time when the Bank of Russia key rate is revised.

Credit institutions may submit their loan applications to authorised Bank of Russia branches within the time required. Credit institutions may indicate any settlement day in their loan applications.

One-day loans can be secured both by marketable assets and credit claims. Loans for more than one day are only extended against credit claims.

The Bank of Russia can reject a loan application on reasons stipulated in Chapter 18 of the Terms and Conditions for the Issue and Redemption of Bank of Russia Loans Backed by Securities or Credit Claims.

Loan issue under applications should be within the maximum limits on outstanding loans secured by marketable assets or by credit claims (except for intraday and overnight loans) established by the Bank of Russia and communicated to credit institutions.

No later than the business day following the day of loan issue, the Bank of Russia sends the credit institution a Loan Issue Notification, which bears information about terms and conditions of the loan and collateral.

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