The Central Bank of the Russian Federation Has Renewed Direct REPO Transactions Against a Security of Shares

On May 22, the Central Bank of the Russian Federation has renewed direct exchange REPO transactions with banks against a security of shares included in the Lombard list of the Central Bank of the Russian Federation.

Such a measure was taken by the Central Bank of the Russian Federation as dependence of the Russian banking system on funds extended to it by the monetary authorities increased.

It is to be reminded that in the post-crisis period the funds extended by the Central Bank of the Russian Federation to commercial banks became a major source of formation of the money supply in the Russian Federation. In such a situation and in conditions of higher instability on global financial markets, the Central Bank of the Russian Federation has decided to renew lending to banks against a security of shares.

At the same time, it is to be noted that rapid expansion of lending to banks on the part of the Central Bank of the Russian Federation in a situation of rather slow growth in the depositary base creates prerequisites for financial instability in future should such lending slow down. In such a situation, the Central Bank of the Russian Federation has to adopt a more cautious approach to refinancing of credit institutions and control banks' risks more carefully.

P.V. Trunin, PhD (Economics), Head of the Monetary Policy Department