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Overnight standing facilities

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Overnight standing facilities

The MNB adopts several instruments for decreasing the volatility of overnight rates. The MNB maintains an asymmetric overnight interest rate corridor to prevent extreme fluctuations in interbank rates. From September 20, 2017 the width of the interest rate corridor is 105 basis points. The interest rate paid on O/N central bank deposits equals to the base rate minus 105 basis points, and the interest be paid on O/N collateralised loans equals to the base rate.

  • At the top of the interest rate corridor the central bank meets without quantity limits the temporary liquidity needs of the commercial banks with its overnight collateralised loan. As a result of this the interbank interest rates can not rise above the interest rate ceiling.
  • The rate on the overnight central bank deposit represents the bottom of the interest rate corridor. As the MNB is willing to tie down excess liquidity in the banking sector at this rate without limitation. The interbank interest rates cannot sink below this level.