Bank of Russia transforms standard liquidity provision mechanism into main and additional liquidity facilities
The Bank of Russia plans to provide the main and additional liquidity facilities with an effect from 16 October 2023.
The main liquidity facility will be used to meet the monetary policy objectives and manage the overall liquidity of the banking sector. The additional liquidity facility is designed to provide liquidity to individual credit institutions to overcome temporary difficulties. It will replace the emergency liquidity assistance.
As part of the main liquidity facility, the Bank of Russia will carry out credit operations and auction-based repos, the conditions of which will not change. When using the main liquidity facility, credit institutions will also have access to standing facilities: intraday and overnight loans, as well as lombard loans, loans against the collateral of credit claims for up to 30 days inclusive, and overnight repos at a rate of the Bank of Russia key rate plus 1.00 percentage point.
The additional liquidity facility will be used to provide the standing facilities only (repos and loans against the collateral of credit claims) for up to 180 days inclusive at a rate of the Bank of Russia key rate plus 1.75 percentage points.
The regulator sets a floating interest rate on credit operations as part of the main and additional liquidity facilities and on repos for longer than one day within the additional liquidity facility. This means that interest rates on the existing loans and repos will change proportionately with any change in the key rate from the date of such change.
The eligible collateral for the main liquidity facility transactions (other than intraday and overnight loans) will be government securities of the Russian Federation and Bank of Russia bonds as well as corporate, subfederal and municipal bonds or credit claims provided the issue/ issuer of such bonds or the party liable under the relevant credit agreement has at least two credit ratings assigned by various rating agencies, with the lowest being АА-(RU) / ruАА- / АА-.ru / АA-|ru| according to the classification of the credit rating agencies ACRA JSC, JSC Expert RA, NCR LLC, and NRA LLC.
The eligible collateral for the additional liquidity facility transactions will be bonds or credit claims other than those covered by the main liquidity facility provided the issue/ issuer of such bonds or the party liable under the relevant credit agreement has at least one credit rating, which should be А-(RU) / ruА- / А-.ru / А-|ru| assigned by the credit rating agencies ACRA JSC, JSC Expert RA, NCR LLC, and NRA LLC. Also, the eligible collateral for the additional liquidity facility will include mortgage-backed bonds secured by the joint and several guarantee of JSC DOM.RF, bonds secured by government guarantees of the Russian Federation, and credit claims where the credit risk level of the party liable under the relevant credit agreements is in line with the eligible credit ratings according to the Bank of Russia methodology.
The intraday and overnight loans may be secured by a wide range of securities and credit claims, which are eligible for both the main and additional liquidity facilities.
No changes have been made to the criteria for credit institutions’ admission to liquidity provision operations and the underlying technology. The operations will be carried out based on the currently existing agreements enabling credit institutions to participate in the credit and repo operations with the Bank of Russia.
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