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4.2 Impact of the Funding for Growth Scheme on payment system liquidity
As a result of the Funding for Growth Scheme (FGS) launched in 2013, the ratio of collateral pledged to the MNB and available as an intraday credit line for payments has declined within the security portfolio, but this did not increase the clearing and settlement risks in VIBER, because of adjustment
by participants. Payments system participants are able to fulfil payment orders up to the limit of the intraday credit line received in exchange for their securities pledged to the MNB and the account balance available on their current account kept at the MNB. However, the various collateral pledged to the MNB not only serve as cover for the intraday credit line available for use in payment systems, but also as cover for overnight and long-term loans provided by the MNB. In the second half of 2013 an increasingly large portion of the stock of securities pledged to the MNB were allocated to provide cover for FGS loans, leading to a reduction in the collateral pledged to payments. While the first half of the year 90-95 per cent of pledged collateral was available for payment purposes prior to the introduction of the FGS, this ratio fell to 60-65 per cent by the second half of the year, following the FGS’s introduction. In order to retain the liquidity required previously for their payment transactions, starting from August 2013 banks continuously increased their stock of securities pledged to the MNB (Chart 20). The higher volume of securities pledging caused a minor shift in the composition of securities, with the rise in the ratio of Treasury bills (5.5 percentage points) and government bonds (5 percentage points) compared to 2012. Due to the adjustment of banks (in the form of additional pledging of securities), the liquidity available for payments remained essentially unchanged (Chart 9).
The number of intraday credit line modifications within the
VIBER rose markedly in 2013. The intraday credit line is one of the elements of payment system participants’ liquidity which can be increased or decreased at any time during VIBER operating hours. Participants can ensure sufficient liquidity
Chart 20 Impact of the Funding for Growth Scheme on payment systems
(2013)
2,400 HUF Billion Per cent 95 100 2,200 90 2,000 80 85 1,800 75 1,600 70 65 1,400 60 1,200 55
Jan. 2013 Febr. Mar. Apr. May June July Aug. Sep. Oct. Nov. Dec. Pledged collateral
Ratio of collateral pledged and available as an intraday credit line for payments vs. total of pledged security portfolio (right-hand scale)
through the intraday pledging of collateral if they hold eligible securities not yet pledged to the MNB. Securities can be pledged and unpledged (modifications of credit line) with the cooperation of KELER, where securities collateral is kept on record, and the MNB’s systems. Banks can initiate modification of the credit line with KELER, and KELER forwards the request toward the MNB following verification of the securities leg, where the new credit line is set in VIBER. The tests conducted during the year revealed that the process required 5 minutes on average. In case of various pledging of securities by an individual VIBER participant, processing does not take place in parallel, but consecutively, and therefore the 5-minute execution time applies per security type. The higher number of credit line modifications stems mainly from FGS, but intraday pledging of securities was needed for executing ICS intraday clearing cycles in several cases.
