The main reason for the fact that the Central Bank does not fully receive from the commercial banks at deposit auctions the amount previously announced is their distrust of the Central Bank and the manat, the expert on banking Akram Hasanov said.
As previously reported by Turan, the Central Bank in June 2016 launched deposit auctions and has already held nine of them. Each time the Central Bank did not fully receive the amount announced before the auction.
E.g., on August 22 the Central Bank raised 30 million manats compared to the planned 50 million. On August 15 it raised AZN 15 million against the planned 50 million. On August 8 it raised 40 million manats compared to the planned 50 million, and on August 1 it raised 20 million manats compared to the planned 50 million AZN.
The expert Akram Hasanov said in an interview with Turan the deposit auctions conducted by the Central Bank are aimed to withdraw excess reserves of AZN available at commercial banks from circulation for a short time.
‘In other words, the Central Bank does not want the money to flow into the currency market and to be used for the purchase of the dollar. Banks are caused to understand that if they have extra money, they should give it to CBA at interest, but should not buy dollars.’
The expert notes that every bank also needs a manat stock to cover the running costs and to pay the depositors. Therefore, commercial banks are also interested in placing a part of their AZN stocks at interest at the Central Bank.
‘Naturally, they place only a very small part of their AZN stocks at CBA. However, CBA, announcing large sums to attract to a deposit auction, wants to assure commercial banks that they should not fear of any devaluation and should give their money to CBA. But the banks do not trust it and therefore place only a small portion of their reserves, and use the remaining money to buy dollars and keep them,’ Hasanov said.
Note that according to international practice, the main purpose of deposit auctions is the sterilization of money supply. At the time of deposit auctions CBA receives commercial banks' deposits for placement. ------72B
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