Riksbank takes measures to facilitate banks’ liquidity management
News The amount of liquidity in the banking system is declining as the Riksbank reduces its holdings of Swedish securities. This places higher demands on banks’ liquidity management. The Riksbank is therefore taking measures to make it easier for banks to plan their day-to-day liquidity management. The Riksbank is increasing transparency around banks’ resale of Riksbank certificates and will begin publishing information on the longer-term development of the liquidity surplus in the banking system. These two measures provide a better basis for banks’ liquidity planning and are one of several forthcoming steps the Riksbank is taking to facilitate banks’ adjustment to an environment with a smaller liquidity surplus.
In recent years, there has been substantial liquidity in the banking system in the form of deposits with the Riksbank. As the Riksbank reduces its holdings of Swedish securities, the amount of liquidity in the banking system will decline. Going forward, this will place greater demands on banks to actively borrow from and lend to other banks, for example through so-called overnight loans. Banks that are monetary policy counterparties of the Riksbank must have the operational capacity and be willing to engage more actively in borrowing and lending liquidity among themselves in the overnight market. This is important for the effective implementation of the Riksbank’s interest rate steering. Banks must also be able to borrow from the Riksbank without impediment by using its standing lending facilities when needed. To facilitate banks’ planning and adjustment of their liquidity management to the new conditions, the Riksbank is now introducing two changes.
Increased transparency regarding the resale of Riksbank certificates
Banks that wish to free up liquidity placed in Riksbank certificates have the option to sell the certificates back to the Riksbank. In order to make information available more quickly to market participants on the amount of central bank reserves in the banking system each day, the Riksbank is shortening the time window during which banks can sell Riksbank certificates back to the Riksbank from between 09.00–15.30 to between 09.00–10.00. Information on any resales will be published on the Riksbank’s website at 10.15. This will provide all banks with faster and more accurate information on the amount of central bank reserves in the banking system each day.
Monetary policy counterparties will continue to be able to use Riksbank certificates as collateral for loans in the standing lending facility.
Improved information on the development of the liquidity surplus
The Riksbank will also begin publishing information on the amount of central bank liquidity expected to be available in the banking system going forward. This will enable banks to plan their own liquidity management on the basis of better information about how the aggregate liquidity surplus is expected to evolve over time.
Further steps to facilitate banks’ liquidity management
The next step in the Riksbank’s work to promote improved liquidity management is to review the terms and conditions of the supplementary liquidity facility, under which loans are provided against collateral such as covered bonds. More information on this will be provided later in the spring.