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The Bank of Russia increased its refinancing of large banks almost twofold in August, as compared with July
According to a monthly monetary market report posted on its website, the Bank of Russia increased its refinancing of large banks almost twofold in August, as compared with July. The amount of redemption bonds issued for crediting institutions came to 155.8 billion roubles last month, the report says. This measure gave a boost to the interbank market. The daily average interest on overnight loans was under 2 percent in the month's first half, whereas in the second half, when a number of banks began suffering from cash shortages, the interest rate went up to 5 percent. Throughout the month, the average liquidity level remained at a relatively low level, almost unchanged from July. Part of the reason for the relatively low liquidity in early August was the growing demand for hard-currency cash and, consequently, its increased purchase on the part of banks. In the month's latter half, the low liquidity was down to a combination of factors, including the need to make scheduled payments and the unwillingness of a majority of banks to use the reduced currency position for acquiring additional rouble cash, amid market expectations of further dollar growth. In August, the Bank of Russia indirectly helped with the boosting of the interbank market, providing, through major banks, cash for their commercial counterparts with no direct access to redemption bonds. Transactions with redemption bonds are reserved for solvent banks that have signed a general agreement with the Central Bank. The redistribution of liquidity from the Bank of Russia to the banking sector via refinancing large counteragent crediting institutions has allowed to contain the rise of interest rates on interbank loans at the end of the month and to avoid problems with scheduled payments.
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