MOSCOW Feb 26 Russia's finance ministry said it
plans to boost liquidity in the money markets using funds it
holds on account at banks by cutting the minimum amount that
must be kept on deposit to 200 billion roubles ($5.6 billion)
from 600 billion.
Finance Minister Anton Siluanov said on Wednesday that the
ministry also intended over the medium term to develop borrowing
tools that would enable it to tap the capital market for
"We are keeping huge funds on treasury account," he said.
"We need to push monetary funds into the economy, not hold it in
accounts at banks, so that banks have liquidity and interest
rates are lower."
The ministry's head of treasury Roman Atyukhin said the rule
on minimum treasury deposits would change in September.
The plan comes at a time of tight liquidity on Russia's
money markets, with the Mosprime one-week interbank interest
rate at 6.5 percent, in line with the central bank's fixed
lending rate which acts as a ceiling for market fluctuations.
Russia's central bank has resisted cuts in its 5.5 percent
benchmark policy rate as it is concerned about inflation.
However, Russian President Vladimir Putin has called for
measures to lower borrowing costs in the economy.
Alexander Morozov, chief Russia economist at HSBC, said the
additional liquidity injection was "significant" but was not
likely to cause big market moves as it would happen over time.
"Since we are not talking about a one-off mechanism the
overall reaction will be muted. It should be marginally positive
for money markets but I don't think we will see a significant
decline in money market rates," he said.
He said Russia was gradually moving towards the model in
Western economies, where finance ministries use short-term
treasury bills to borrow on the market rather than hold large
funds on deposit.
VTB Capital analyst Maxim Korovin said the deposit rule
change would be positive for smoothing liquidity fluctuations
over the course of the year, and would help lower money market
rates towards 5.5 percent.
Some economists have blamed liquidity injections by the
central bank, which has been stepping up medium-term refinancing
operations for banks, as a factor behind a recent fall in the
The currency hit a historic low against a dollar-euro basket
on Wednesday, on concerns that Ukraine may default.
However, HSBC's Morozov said he expected the impact of the
finance ministry plan on the rouble to be limited.
"I don't think Russian banks are speculating against the
rouble right now. What we see happening with the rouble should
be attributed to the behaviour of banks' clients - corporates
and households - rather than banks themselves," he said.