Serb Central Bank Ready to Offer Cash as Surplus Liquidity Dries

Serbia’s central bank is ready to expand its role in open-market operations and offer banks cash as liquidity dries up after tighter policy measures were introduced on June 7.

The outstanding repo stock, or surplus liquidity commercial banks keep at the central bank, fell to 12.56 billion dinars ($135.3 million), a record low, from 24.2 billion dinars on June 20, according to the National Bank of Serbia figures released after a repo auction today. It stood at 137.2 billion dinars at the start of 2012.

“The National Bank of Serbia and commercial banks are fully prepared and tested for adequate repo operations,” Vice- Governor Bojan Markovic said in a statement to Bloomberg. The bank will ’’offer limited liquidity at a multiple price’’ if it switches to direct repo operations, he said.

The change comes after the central bank raised its benchmark interest rate 50 basis points to 10 percent on June 7, and tightened reserve requirement rules to drain liquidity from the market amid the government’s fiscal expansion and depreciation pressure’s on the dinar.

The central bank will take dinar-denominated Treasury bills and bonds as collateral. The outstanding dinar debt held by bond investors with maturities through Dec. 20 stood at 138.2 billion dinars as of June 25, according to data compiled by Bloomberg.

Since it started inflation targeting in August 2006, the central bank has used reverse repo operations to drain excess liquidity as high interest rates attracted both domestic and foreign investors to park their funds with the Belgrade-based Narodna Banka Srbije.

To contact the reporters on this story: Gordana Filipovic in Belgrade at

To contact the editor responsible for this story: James M. Gomez at

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