Backup rate - The share of deposit accumulations in the central bank. The backup rate includes deposits of the population, as well as other, which should contain a banking institution in the form of cash or in the form of open deposits.
Backup rate - The standard (is established in the form of a percentage), reflecting the necessary amount of deposits, which should be kept in their own storage facilities of a banking institution or Central Bank. The growth of reserve standards leads to the fact that the volume mandatory reserves increases. At the same time, banks lose the ability to make loans. Reducing the backup rate contributes to the transfer of mandatory reserves to the excess category, which increases the possibilities of the Bank to attract funds by issuing loans.
Backup Norm: Entity, Purpose
When problems appear in the economy (price reduction, unemployment, and so on), the Central Bank decides on the need to increase the amount of cash supply in order to stimulate total costs. The goal is to absorb free resources and align.
In order to increase the monetary proposal, the heads of the Central Bank are doing everything possible for the growth of excess reserves. It is implemented in several ways - making transactions of the Central Bank for Purchase valuable papers, decline in the account (goal - to encourage commercial structures to increase reserves), reducing the backup rate (allows you to automatically translate the current reserves into the excessive category).
Mandatory reserves were not always a tool of monetary policy in the modern sense. This lever of influence on the banking system was first determined by the need to insurance of bank depositors, as well as increasing the responsibility of banks to their clients.
In a modern sense, the minimum mandatory reserves are a monetary policy tool, the essence of which is to establish a mandatory resource rate that commercial banks must be stored in the Central Bank as a percentage of deposits attracted.
Minimum mandatory reserves as a monetary policy tool is a lever of deep influence on the money supply. Mandatory reservation is intended to perform two main functions in the economy, namely:
o means of maintaining the liquidity of commercial banks;
o Cash control tool in circulation. The primary function of minimum reserves is to provide
liquidity of commercial banks. Formation of a centralized fund money Must serve as a reliable support of deposits. In today's conditions, the role of this function is related to ensuring stability banking system, promotes both maintaining the continuity of the functioning of the payment and settlement mechanism and to reduce the riskiness of contributions to banks and reduce damages from their bankruptcies.
To date, this function has been transformed and is associated with ensuring the stability of the banking system as a whole, which contributes, firstly, maintain the reliability of the payment and settlement mechanism and, secondly, to reduce the risk of banking investments and minimizing losses in bankruptcy cases of banks.
The main function of compulsory reservation is the impact on the credit potential of commercial banks in order to regulate the amount of money in circulation. The level of minimum reserves directly affects the quantitative parameters of lending to the subjects of the national economy by commercial banks and determines the amount of money supply.
The central bank periodically changes the rate of compulsory reservation, depending on the market situation and the type of policies. By restrictive monetary policy, the Central Bank resorts to increasing the norm of mandatory reserves, which leads to a decrease in the credit capabilities of commercial banks and reduce the money supply in circulation.
For the implementation of a stimulating (expansive) monetary policy, the Central Bank reduces the norm of mandatory reserves, as a result of which most of the resources remain at the disposal of commercial banks, which makes it possible to increase the volume of lending and leads to an increase in the money supply in circulation (Fig. 6.5).
Fig. 6.5. Use the norms of minimum required reserves as a monetary policy tool
Modern monetary policy provides for the use of minimum reservation standards as a tool for long-term influence on stabilization cash circulation and anti-inflation policy. The purpose of the application of the norms of mandatory reservation is:
* Restriction of the growth rate of the money supply;
o withdrawal excessive means with money circulation;
o formation of a tough connection between the money supply and the monetary base;
* Regulation of demand for bank resources.
The mandatory reservation rate is established in the legislative manner. The procedure for its use is significantly different both quantitatively and qualitatively in different countries. Frequent manipulation of mandatory reservation standards may cause certain difficulties, since even its small fluctuations significantly affect the volume of lending in the economy. This tool provides a solution to a greater degree of long-term monetary policy tasks.
When using the mandatory reservation standards, not only the multiplicative effect of credit expansion should be borne, it weakens its handling, but also an impact on the level of profitability of commercial banks, since the money on reserve accounts do not bring income. This is a kind of additional "tax" on the activities of commercial banks.
The mechanism for establishing minimum bank reserves as an effective and reliable monetary policy tool has significantly lost its importance over the past years. In many countries, central banks hold a gradual decline in reserve requirements. For example, the central banks of the countries of the European system of central banks use the reservation rate, which is 2%, and on urgent deposits of more than two years, the rate of minimum backup requirements is not established.
The National Bank of Ukraine, in accordance with the Regulations on the procedure for the formation of mandatory reserves for banks of Ukraine, uses the provisional reservation standard as one of the monetary policy implementation tools in order to control the monetary aggregates due to a reduction (increase) of the money multiplier. Obligations to comply with reserve requirements arises in a commercial bank from the date of receipt of the NBU license for the right to implement relevant banking operations.
Which the latter should store in the form of interest-free contributions in a central bank or other organization that performs the function of the banking system regulator. The norms of mandatory reserves are set as a percentage of the volume of deposits attracted by banks and may vary by types of deposits. If there is a system in the country mandatory insurance Bank deposits, these reserves no longer comply with deposit insurance as well as serve to perform control and regulatory functions of the Central Bank.
Excessive reserves are the amounts over mandatory reserves that can be stored on their own initiative in case of unforeseen situations (for example, unforeseen cases of increasing the need for liquid funds).
The higher the mandatory reservation rate, the less means can be used by banks for active operations (including credit). An increase in the norm of mandatory reserves reduces the action of a bank (monetary) multiplier and should lead to a decrease in the money supply. Thus, the central bank through the mandatory reservation rate affects the monetary proposal.
The bid of mandatory reserves is usually used as an auxiliary measure, since the change in the rate may have a significant impact on banking profits, but in practice, alas, weakly affects the monetary proposal. The monetary proposal is subject to the influence of a too large number of multidirectional factors, which, as a result, can neutralize the impact of changes in the mandatory reservation rate.
The change key bet. The key interest rate, or the main interest rate, is a bet on loans and deposits determined by the Central Bank of the country for a certain period. It plays a role in the establishment of interest rates of commercial institutions in the country, as well as it has a direct impact on the level of inflation and quotes in the Forex market. Increased key interest rates, as a rule, the rise in price of national currency and decrease in inflation.
The mechanism of the impact of changing the key rate is next. Increased key rates leads to a reduction in borrowing of commercial banks in the Central Bank. This leads to the collapse of the operations of commercial banks on the provision of loans and the growth of the loan interest. As a result, the volume of lending decreases, loans are more expensive. Money is becoming more expensive. Reducing the key rate is acting in the opposite direction and as a result, money is cheaper.
Changing the account.Accounting rate (refinancing rate) - the rate on which the central bank as a lender of the last instance credits commercial banks. The mechanism of exposure to changes in the account is next. An increase in the accounting rate leads to a reduction in borrowing of commercial banks in the Central Bank. This leads to the collapse of the operations of commercial banks on the provision of loans and the growth of the loan interest.
As a result, the volume of lending decreases, loans are more expensive. Money is becoming more expensive. The decline in the account is valid in the opposite direction and as a result, money is cheaper. The accounting rate is usually lower than the rate of the interbank credit market, which should (theoretically) make this tool for monetary regulation more efficient. However, obtaining a loan about the Central Bank may be limited and administratively, since not any bank can contact him.
Operations on open market - Purchase and sale by the Central Bank of Securities. Buying, the Central Bank contributes to an increase in cash at the disposal of Kombankov. This leads to an increase in the volume of loans provided by banks, a decrease in the rate of loan interest, the cost of money and the growth of money supply. Selling, the Central Bank provides the opposite result. Often these operations are carried out in the form of repo (reverse ransom agreements). The bank sells securities with the obligation to redeem them at a certain price through a certain time. The fee for this service is the difference between purchases and sales prices.
The use of operations on the open market affects bank reserves almost instantly. It is believed that operations on the open market are the most flexible and accurate tool for monetary policy, which has a more subtle indirect impact on the money market than others.
Types of monetary policy:
1. Hard monetary policy - maintenance of money supply at a certain level.
2. Flexible monetary policy - maintaining interest rates at a certain level.
The choice of a variant of the monetary policy depends on the reason for changing the situation in the money market. For example, the increase in demand for money is associated with inflation. In this case, the tough money maintenance policy is appropriate.
It should be borne in mind that at the same time fix the monetary mass and the rate of interest of the Central Bank is not able. For example, if the demand for money is growing, then to maintain a steady interest rate of the Central Bank, it is forced to expand the offer of money to configure the impact on the interest rate from the increased demand for money.
The Central Bank cannot fully control the money supply. For example, an increase in interest rate in the money market may cause reduction of excess reserves, but at the same time encourage the population to increase its deposits and, therefore, to reduce cash. This will affect the money multiplier and, instead of reducing the offer of money, we will get an increase in this proposal.
Depending on the current economic situation and goals economic Policy The state can pursue a cheap money policy or a policy of expensive money.
The policy of cheap money.If the real volume of production is significantly lower than the production volume in full-time employment (real GDP is significantly lower than potential GDP), the economy suffers from unemployment. Under these conditions, a policy of cheap money should be pursued, that is, the offer of money should be significantly increased.
This uses the following techniques:
Purchases on the open market;
Reduction of the mandatory reservation rate;
Reduced key rates.
The result of the listed measures will be an increase in excessive reserves of combanks, which may lead to an expansion of the supply of money and to the growth of money supply. Expanding the money supply will cause a decline in interest rate and, consequently, investment growth. Cumulative demand under the influence of the multiplier effect will change (in this case It will increase) to a greater extent than the investment will change, which, in turn, will shift the economy in the right direction - to the level of complete employment. The policy of cheap money is carried out if the main problem of the economy is unemployment and decline in production.
Politics of expensive money.If the economy has a situation of inflation of demand, then it is advisable to pursue a policy of expensive money.
The following measures are applied:
Sales on the open market;
Increasing the mandatory reservation rate;
Enhance the key bet.
Combannels as a result of listed measures begin to experience a shortage of funds and are forced to reduce the volumes of loans issued. This leads to a decrease in the money supply and an increase in the interest rate. The high interest rate leads to a reduction in investment costs, through them - to the reduction of aggregate demand, which should restrain the inflation of demand. The policy of expensive money is carried out if the main problem of the economy is inflation.
The effectiveness of credit and monetary policy is complicated by the reverse effect of GDP at the interest rate. Of course, the interest rate largely determines the equilibrium level of GDP, as it affects investment and cumulative demand. However, there is a feedback. The level of GDP affects the equilibrium interest rate, since the demand for money for transactions depends directly from the level of nominal GDP.
This means that GDP growth caused by the policy of cheap money increases the demand for money, thereby weakening the effectiveness of this policy to reduce the interest rate. The policy of expensive money leads to a decrease in nominal GDP. However, this reduces the demand for money and weakens the effectiveness of this policy as a means of increasing the interest rate.
The policy of cheap money is not applicable in the economy of complete employment. If the economy reached / approached the level of complete employment, then the increase in total demand will not affect the real volume of production and employment, as free resources, at the expense of which the release can already be increased. The result of the policy of cheap money in this situation will be the promotion of the inflationary spiral.
The policy of expensive money is not applicable (inappropriate) in the conditions of recession and unemployment. It will only lead to a further reduction in real production and increased unemployment.
Advantages and disadvantages of monetary policy.
I. Advantages: It is believed that monetary policy is the main tool for stabilizing the economy.
1. Credit and monetary policy is a rapid change. It is believed that its impact on the money market (especially, if we are talking about operations in the open market) almost instantaneous.
2. Credit and monetary policy can be carried out relatively independently of political structures and is not too exposed to political motives (the so-called "election influence).
3. Impact of credit and monetary policy on the economy and economic agents is softer and thinner than the impact of changes in government spending or tax policies.
II. disadvantages: The application of credit and monetary policy has certain limits.
1. Control over the suggestion of money from the Central Bank is weakened with the development of alternative cash investment channels (for example, electronic money). In the same direction, the internationalization of the economy is influenced: the flow of financial resources from a given country or to this country can significantly impede control over the money supply.
2. The policy of cheap money can create conditions for expanding lending, but cannot force the Combans to issue loans, and economic agents are to take them.
3. The modern economic cycle is often characterized by a combination of a decline in production and inflation (stagflation), that is, at the same time there are also reasons for the policy of expensive money, and the reasons for the policy of cheap money.
4. The speed of money is usually changing in the direction opposite to changes in the money supply, which slows down or completely levels changes in the money supply caused by credit and monetary policy. For example, during the period of inflation, the monetary policy is aimed at restricting the money supply, but when inflation, the speed of money increases. The effectiveness of the policy pursued is zero. On the contrary, during the recession, credit and monetary policy is aimed at an increase in the money supply, but the speed of money slows down, which also leads to the zero result of the activities taken (running up the escalator that goes down).
The size of mandatory reserves (in%) to the Bank's obligations, as well as the procedure for depositing of mandatory reserves in the Bank of Russia is established by the Board of Directors. The law also has established that the standards of mandatory reserves cannot exceed 20% of the Bank's obligations, and may be different for various credit organizations. The standards of mandatory reserves cannot be further changed by more than 5%.
Currently, mandatory reserves are the most liquid assets that are required to have all credit organizations. According to the rules established in the world, the obligatory reserves are stored in the Central Bank in the form of perpetual deposits. The upper boundaries do not exist (in the Russian Federation - up to 20%). These funds are not frozen. They can use different banks for a long time, but at the same time at the disposal of the Central Bank should remain a certain amount of the so-called minimum reserve necessary for the work of the business bank during a certain period (usually one month). If the bank does not fulfill this requirement, it pays penalty interest.
The mandatory reserve rate is calculated as the ratio of its amount to the urgent obligations of the business bank. For example: the rate of reserves is 20%. This means that a bank has urgent obligations in the amount of 1 million rubles.
must be located in the Central Bank the reserves in the amount of 200 thousand rubles. If in the next month, urgent obligations will increase to two million, the Bank must increase its reserves in the Central Bank to 400 thousand. Reservation policy is a rather rough method and if other instruments are not used, a certain rigidity in economic regulation is created. It is believed that operations in the open market and accounting policies - methods of fine regulation. In order to mitigate the reserve policy, the Central Bank is trying to complement these measures and relatively rarely make changes to the norm of reserves.
Minimum reserves perform two main functions. First, they, as liquid reserves, provide the obligations of commercial banks on deposits of their clients. By changing the rate of mandatory reserves, the Central Bank maintains the degree of liquidity of commercial banks at the minimum permissible level depending on the economic situation. Secondly, the minimum reserves are a tool that is used by the Central Bank to regulate the amount of money in the country. Through the change in the standard of reserve funds, the Central Bank regulates the scale of active operations of commercial banks, i.e. The amount of loans issued, which means credit emissions.
Credit institutions can expand loan operations, their mandatory reserves in the Central Bank exceed the established standard. When the mass of money in turnover (cash and non-cash) exceeds the necessary need, the Central Bank is conducting a credit restriction policy by increasing deductions, that is, a percentage of reserving funds in the Central Bank. Thus, he forces banks to reduce the amount of active operations.
For the first time, the norm of mandatory reserves began to be used as a monetary policy tool with the emergence of commercial banks in April 1989 and the beginning of the formation of a two-level banking system. The USSR State Bank was formed by the Fund of Regulatory of Credit Resources, the enrollment in which was subject to reserves of all newly created commercial banks. After the Union republics were transformed into sovereign states, on April 30, 1991, a reserve fund of the credit system was created in Russia (now a fund of mandatory reserves) based on the deposit of part of the resources attracted by commercial banks.
Initially, the norm of the mandatory reservation is set for all deposits in the amount of 2% of the amount of attracted funds. From February 1, 1992, an active policy on changing the norm of compulsory reservation begins, and the differentiation of these norms is introduced, depending on the time of attracting funds. Since the main problem of 1992-1994. There were high rates of inflation, the Central Bank improved the binding of the money supply and the reduction of inflation.
Until February 1992, these norms changed three times and all the time in the direction of increasing. But in the period 1992-1994. Commercial banks could violate the requirements of the Central Bank with almost no sanctions. There is a lot of examples, and very often no response to the violation was not followed. In February 1992, the following R values \u200b\u200bwere established:
In January-February, the Central Bank comes to the conclusion that it is necessary to increase the rate of mandatory reserves. In February-March there is an increase in all rates by 5 percentage points:
After this increase, the norm remained constant until January 31, 1995, but, as mentioned above, compulsory reservation requirements were often disturbed.
In October 1994, after the "black Tuesday" and the jump in inflation, the leadership of the Central Bank and the place of Gerashchenko comes Paramonov, which sharply changed the approach to the use of this instrument of monetary policy in Russia. The norm of mandatory reserves has become an actively used tool, and on February 1, 1995, new rules for regulating the activities of commercial banks were announced:
Commercial banks should have been required to adhere to established norms, in the event of a violation, serious sanctions were applied up to the deprivation of a license.
Regulations on demand accounts are improved, and on long-term liabilities - reduced. A new differentiation of standards on the principle of liquidity appears.
The rate of compulsory reservation on currency accounts has been introduced. This innovation caused the greatest indignation of commercial banks.
As a result of these changes, the following norms were introduced:
After the announcement of these changes, commercial banks tried to neutralize the actions of the Central Bank, uniting the Association of Commercial Banks headed by Inkombank. An open letter was drawn up by the President, with the expression of dissatisfaction with the policy of the Central Bank and the prevention, which, if such a tough monetary policy is indeed implemented, then the banking system of Russia faces the full collapse. Indeed, the listing of 1/5 of the ruble contributions to the backup accounts means the loss of a tangible part of the profits. The opposition of the Central Bank and commercial banks continued until May 1, 1995, when a compromise solution was found. The Central Bank went on minor concessions:
Consider the situation with currency accounts. Mandatory 1.5% needed to deduct to the reserve account in the Central Bank not in the currency, but in rubles. To fulfill obligations under foreign exchange accounts, commercial banks in June begin massive sale of dollars. One of the processes in the foreign exchange market was a sharp increase in supply. What was the situation on the demand? The main buyer of the currency in 1995 was the Central Bank. After "black Tuesday," when the Central Bank conducted serious currency interventions to stabilize the ruble exchange rate, at the end of 1994, the CB's foreign exchange reserves were dried, which is extremely negatively affected by the creditworthiness and development of foreign economic relations. And from January 1995, the Central Bank begins to pursue a policy on increasing gold reserves. In winter and at the beginning of the Spring, the Central Bank presented a huge demand for currency than provoked the growth of the dollar. Mai makes a decision on the adequacy of the size of the gold and foreign exchange reserves, and the purchase of currency is stopped for their replenishment. So, demand falls, and the proposal is growing, and by the summer of 1995 there is a fairly interesting situation in the foreign exchange market. Consider the dollar rate in 1995:
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Dollar rate, r. |
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A sharp drop in the dollar rate in June leads to the strengthening of the ruble, which makes export unprofitable and increases the yield of imports. As russian economy He strongly depends on the export, the development of export industries slows down, and imports begins to develop, which threatens with the further lagging in domestic enterprises. This forced the Central Bank to respond to the introduction of a currency corridor. After that, the Central Bank regulates the ruble exchange rate through ruble and currency interventions. The currency corridor really contributed to the stabilization of the ruble, made an economic situation more predictable for exporters and importers. 1995 became decisive in reducing inflation rates in many respects due to the competent policy of the Central Bank.
The next change in the norm of mandatory reserves occurs on May 1, 1996. Inflation rates are reduced, domestic prices are stabilized, and such a positive trend allows you to slightly weaken the monetary policy. There is a mitigation of monetary policy in the field of compulsory reservation:
Reduced standards on foreign currency accounts has become possible due to the stabilization of the ruble exchange rate. However, on June 11, 1996, the former standards are again returning - 20% and 1.5%, because The election race began and it became necessary to fulfill the part of the promises - payments for wage arrears, etc. The Ministry of Finance takes a strange decision on the transfer of the Central Bank to the 5 trillion budget. rubles to fulfill government obligations. The issuance of these funds was carried out in its pure form due to the monetary emission, and in order for the monetary mass does not increase, it was necessary to associate it with refund to previous standards. Especially sharply raised the rate of reservation on currency accounts - up to 2.5%. It is believed that over the next month, half of the money listed in the Ministry of Finance was associated with the help of mandatory reserves. It had a positive effect on reducing inflation rates, and since the disinflation process continued, it became possible to soften again. monetary policy August 1, 1996
The Central Bank again begins a new policy. With a sufficiently low rate of inflation at 12% per year, the profitability of GKO is unreasonably high and reaches 200%. This leads to the "effect of displacement" - the situation when investments in the real sector are supplanted by investments in government securities. Investing in the real sector gives a very low yield compared with GKO incomes, and commercial banks are unprofitable to spend their redundant reserves for lending to enterprises. Thus, the money in the economy is not concentrated in real, but in the financial sector, and if all prerequisites for economic growth is not observed. The Central Bank begins to conduct a policy of reviving the investment sector by aligning the mandatory reservation standards for currency and ruble accounts. On November 1, 1996, the norm on ruble deposits is reduced and increases for currency accounts:
The growth of currency accounting standards leads to an increase in the expense of the currency and the fall of the dollar, on the other hand, it focuses commercial banks to work with ruble, not foreign exchange, contributions of the population. The percentage of first rises, and the second decreases, encouraging the population to keep money in rubles, and not in currency. The possibility of lending to the Russian, not American, economy.
This trend towards the equalization of ruble and foreign exchange deposits continues and further: on April 1, 1997, the following changes occur
The decline in regulators on ruble accounts leaves at the disposal of commercial banks more ruble reserves for investment, the increase in currency deposits stabilizes the dollar exchange rate and stimulates the desire to work with the ruble.
In November 1997, there is a crisis that is unknown to the general public. Only thanks to the policy of the Central Bank, we avoided the crisis similar to the August, in 1997, pulling it on the year. At that time, the Asian crisis was restrained, whereas in 1998 Russia could not be avoided due to unreasonable budget policy.
In 1997 financial markets Asian countries became unstable, and foreign investors will lead to capital from there. Russia also applies to countries with high risk of investments for non-residents, and this leads to their mass outflow from the GKO market. This meant simultaneous sale of a large number of securities to remove capital and transfer ruble funds obtained as a result of sales in foreign currency. A large money mass flows into the foreign exchange market and the demand for the dollar increases sharply, while fluctuations in the dollar are limited to a currency corridor. The Central Bank cannot allow the ruble rate to be out of them as the established currency corridor, and must conduct massive currency interventions to maintain the ruble exchange rate, leading to rapid exhaustion of gold reserves. Therefore, to maintain the course of the ruble Central Bank, decides to assist commercial banks, for which it raises the norm of mandatory reservation on currency accounts to 9%. Commercial banks had to throw a large amount of currency to the market, which equalized demand and proposal and prevented the collapse of the ruble in November 1997.
From February 1, 1998, an identical norm of mandatory reserves is introduced for all currency and ruble accounts in the amount of 11%. In the summer of this year, monetary policy is slightly weakened, as the impuditution of funds associated with the default and the economic crisis increases. August 24 to facilitate the passage of payments and providing commercial banks with free reserves, RNA is reduced 1 percentage paragraph to 10%.
After the financial crisis, the approach to the definition of the norm of mandatory reservation is changed - it is not established on the liquidity of funds, but on the specific weighing of investments in the GKO in the assets of the bank. As a result of the refusal of the state, commercial banks have become insolvent due to its obligations, because A significant part of the assets was frozen. Banks could not hold payments to their customers, and the following changes were made to neutralize it on September 1, 1998:
Since the "frozen" in the GCO money is less and less influenced by liquidity, then in December, the norm again becomes one for all accounts in the amount of 5%.
Since August 1998, the norm of mandatory reserves lose its role to the monetary policy instrument and does not affect the rates of inflation and economic growth, but is only a means of increasing the liquidity of funds and solvency of the commercial bank.
In the spring of 1999, it starts to be used as a monetary policy tool, since, despite the fact that many banks broke out, payment system He earned again, and it became necessary to further use this tool to combat inflation.
Until today, it changes twice in the direction of increasing, because Inflation becomes a problem again. June 10, 1999:
On January 1, 2000, there is another tightening of monetary policy to combat inflation and ruble support:
In 2000, it is necessary to keep the low rate of inflation and contribute to increasing economic growth rates simultaneously with the country's dedollarization policy.