The design and implementation of the MNB’s euro sale programme introduced in relation to early repayments
As a result of the early repayment programme launched in the autumn of 2011, buying demand for several billions of euros arose on the side of domestic banks. The purchase of such amounts in the foreign exchange market would have alone contributed to a substantial weakening of the forint; moreover, it could have led to a speculative attack, further aggravating the depreciation of the currency. The objective of the MNB’s euro sale programme was to use the Bank’s foreign exchange reserves in a prudent manner, under clearly defined terms, to prevent depreciation of the national currency without increasing the country’s vulnerability. Both the situation of domestic banks and the development of the instrument were made difficult to a great extent by the fact that the volume of loans to be repaid and hence the quantity of foreign currency necessary for hedging were uncertain. The Bank therefore needed to define the parameters of the instrument so as to enable credit institutions to continuously buy foreign currency from the Bank, but without encouraging overhedging and to ensure that the price of the instrument is not cheaper than the market rate, but not so high as to discourage banks from using it. The MNB held a total of 22 tenders; it paid out approximately EUR 2.6 billion of the foreign currency sold at the tenders, equalling 60 per cent of the total volume of the early repaid loans.
When requesting a correction, please mention this item's handle: RePEc:mnb:bullet:v:7:y:2012:i:1:p:31-40. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maja Bajcsy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.