Liquidity management

The purpose of Norges Bank's liquidity management is to ensure that the Executive Board's interest rate decisions have a broad impact on short-term money market rates. This is achieved by steering the level of bank reserves, i.e. bank deposits at the central bank.

Norges Bank ensures that the banking system has surplus liquidity on a daily basis, which the banks deposit in their current accounts at Norges Bank. Short-term money market rates thus remain close to the sight deposit rate, which is the key policy rate. A set volume of bank reserves in Norges Bank (a quota) bear interest at the key rate. The sum of bank quotas, the total quota, is set at NOK 45 billion. Bank deposits in excess of this quota bear interest at a lower rate, the reserve rate. Norges Bank aims to maintain reserves in the banking system at an average NOK 35 billion with an interval of ±NOK 5 billion around this level.

Quotas in the system for the management of bank reserves is published twice a year as a Circular.

The government has an account in Norges Bank. Bank reserves are reduced by incoming payments to the government's account and increased by outgoing payments. Norges Bank draws up forecasts of bank liquidity through the year. On the basis of the forecasts, Norges Bank determines whether there is a need to provide or drain reserves in the banking system through market operations. Norges Bank provides reserves via fixed-rate loans (F-loans) and drains reserves via fixed-rate deposits (F-deposits). As necessary, Norges Bank can also execute fine-tuning operations in order to rapidly change the amount of reserves in the banking system.

Published 6 June 2014 14:59
Edited 22 May 2015 14:33