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Azerbaijanâ€™s banking sector sees imminent problem of current liquidity

16 September 2008 09:54 (UTC +04:00)

â€œGiven the decline in capitalization of short-term notes market this year, we can conclude that both the banksâ€™ liquidity and interest in notes have decreased. Yield on notes is low at 11.02% per annum and this is very low on credits,â€ he added.
In addition, the repo turnover exceeded AZN 3.3 billion since early this year.
In repurchase agreements, or repos, central banks typically sell and buy debt securities for a set period, regulating the amount of money available in the banking system.
In this deal, the party that sells securities to another party in return for cash agrees to repurchase equivalent securities at an agreed price and on an agreed future date.
It thus represents an important tool in monetary management in order to regulate liquidity.
That is to say, the central bank resorts to reverse repos when liquidity declines and to repos when liquidity is up.
NBA didnâ€™t carry out any reverse repe this year, or only bought liquidity from banks. Notes market went to the lowest in one and a half years though.
Also, repo transactions are mostly overnight because 3 and 7-day repos are not interesting for banks. This shows that banks only rely on their own liquidity only for little time.