Central Bank’s Decision on Mandatory Reserve Payments and Potential Concerns for Banks and Non-Banking Economy

Central Bank’s Decision on Mandatory Reserve Payments and Potential Concerns for Banks and Non-Banking Economy

The Central Bank has announced that, in an effort to reduce the cost of monetary policy, it will not pay banks a day on their mandatory minimum reserves (PMR). So far, these reserves have been invested at a rate equal to the repo rate. It is obviously painful for the banks at first, but it should also cause some concern among those of us who have nothing to do with banks at all.

Reserves of any bank with NB are pensions that the bank holds in NB on its own account. From them, the castle makes daily client transfers to other banks and, conversely, deposits the pensions that it drank thanks to client transfers from other banks into its reserves. The mandatory minimum reserve for that bank is then the amount that the bank must have on average for the past month. This amount is determined by the National Bank of each bank according to a specific formula.

From the end of 2001 until now, NB banks paid balances on their banks in NB and in their PMR at the repo rate (balances above the PMR were not paid). The current repo rate is seven percent per annum, and the sector-wide PMR volume is 120 billion crowns. If they don’t, the banking sector will lose 700 million crowns in annual revenue.

It is therefore understandable at first for the banks. It cannot be ruled out that they will at least try to compensate for this loss with annual interest rates or interest rates on deposits.

Worrying even for the non-banking state of the economy, there is, at first, something else to do with this: the taxation that NB has changed for its move, i.e. the effort to reduce the investment of political money, to save the people. As soon as the central bank lets it take its profit or loss, the threat of sweat.

For example, it will give the impression that, in an attempt to save money, the NB central bank is setting and will set the repo rate n, rather than the state of the economy according to their view.

And what about h: the financial markets may start to doubt the current state of the NB itself, that it does not mind the losses stemming primarily from the costs of its currency policy. These doubts can be a real threat to the very integrity of me

Michal Skoepa

esk spoitelna is a bank with the most traditions on the esk market. For 200 years, it has been one of the fundamental pillars of the Czech banking system. Currently, 4.7 million clients provide services for piblin. Since 2000, it has been part of the international financial group Erste Group Bank.

More information at: www.csas.cz

2023-09-25 08:29:47
#duality #suffered #effort #save #anxiety

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