Bank of Russia launches long-term repo auctions in late May

The Bank of Russia will be offering new instruments to provide ruble liquidity to credit institutions — one-month and one-year repo auctions. These operations are aiming to decrease the maturity mismatch in banks’ balance sheets amid the shrinking structural liquidity surplus and reducing maturities of credit institutions’ liabilities. Long-term refinancing with the Bank of Russia will create additional incentives for banks to restructure existing loans and extend new long-term loans.

One-month and one-year repos will be carried out on a monthly basis in accordance with the schedule. All banks that already have the opportunity to conduct repos with the Bank of Russia may take part in the repo auctions.

The Bank of Russia will accept the following collateral under one-month and one-year repos: federal government bonds put on the Lombard List and bonds of constituent territories of the Russian Federation and municipalities with the highest credit rating according to the national rating scale. The list of acceptable collateral is reduced as compared to short-term repos since this is required by the Bank of Russia’s risk management policy.

The minimum rate for one-month repo auctions equals the Bank of Russia key rate effective as of the transaction date increased by 0.1 percentage points. The interest rates established at the auctions will remain unchanged. One-year repo auctions will be carried out at a floating interest rate equalling the key rate increased by 0.25 percentage points. If the Bank of Russia changes the key rate, the interest rate for concluded one-year repos will be adjusted by the amount of change in the key rate.

Other parameters of one-month and one-year repo auctions are similar to the effective parameters of shorter-term repo auctions organised by the Bank of Russia. The maximum amount of liquidity provided at each auction will depend on the current and forecast liquidity situation in the banking sector.

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