Through instruments, the National Bank regulates liquidity and interest rates in the money market, influences lending activity of banks and exercises control over the volume of money supply in circulation.
In general, monetary policy instruments are divided into 3 types:
Open Market Operations are regular operations of the National Bank in the form of auctions for provision or absorption of liquidity in the money market with a view to set interbank interest rates around the base rate. Open market operations are conducted at the National Bank’s initiative. Highly liquid and risk-free securities are used as collateral while conducting open market operations.
Standing Facilities are monetary policy instruments used to adjust liquidity volumes which resulted from open market operations. The main objective of standing facilities is to limit volatility of short-term interest rates in the money market. Such operations are conducted at the initiative of banks.
Minimum Reserve Requirements are used to regulate the structural liquidity as well as liquidity and interest rates in the interbank money market. By changing its minimum reserve requirements, a central bank regulates the demand from banks for its reserves and, by using its instruments, it maintains the money market liquidity at the level enabling to keep short-term interbank interest rates within the required band.
Minimum reserve requirements
For each type of reserve obligations a separate standard of minimum reserve requirements is established:
1) short-term liabilities in national currency – 2%;
2) long-term liabilities in national currency – 0%;
3) short-term liabilities in foreign currency – 3%;
4) long-term liabilities in foreign currency – 1%.
|
Purpose |
Type of Instrument |
Instrument |
Collateral |
Frequency |
Provision / withdrawal duration |
|---|---|---|---|---|---|
|
liquidity provision |
standing facilities |
KASE currency swap |
USD |
upon request from commercial banks |
1 day |
|
KASE Reverse Repo |
government bonds |
upon request from commercial banks |
1 day |
||
|
open market operations |
NBK auction for the purchase of securities with the reverse sale |
Lombard List |
as needed |
7 days |
|
|
liquidity withdrawal |
NBK Notes Auction |
- |
in accordance with the schedule of issuance of notes |
28 days |
|
|
NBK Deposit Auction |
- | daily |
7 days |
||
|
standing facilities |
NBK Deposits |
no collateral |
upon request from commercial banks |
1 day |
List of collateral
Lombard List consists of the following securities accepted as collateral on NBK auction for the purchase of securities with the reverse sale:
|
Type of security |
|---|
|
1. Government Bonds of the Republic of Kazakhstan nominated in tenge |
| 2. Municipal bonds of Almaty and Astana nominated in tenge |
|
3. Bonds of international financial organizations nominated in tenge |
|
4. Bonds of kazakhstani and foreign issuers, nominated in tenge, with issue rating at the level of sovereign rating of the Republic of Kazakhstan on a scale of one of the leading rating agencies (Standard & Poor's, Fitch or Moody's) or higher (with the exception of securities nominated in tenge, bearing currency risks) |
|
5. Corporate bonds of kazakhstani and foreign issuers, nominated in tenge, with issue rating not lower than «BB-» by Standard & Poor's scale and / or Fitch and / or «Ba3» according to Moody's scale or higher (with the exception of securities nominated in tenge, bearing currency risks) |
