Through its liquidity policy, Norges Bank ensures that the banking system has surplus liquidity every day that the banks deposit as sight deposits with Norges Bank.
As from 3 October 2011, a set volume of bank reserves in Norges Bank (a quota) will bear interest at the key rate. Deposits in excess of this quota will bear interest at a lower rate, the reserve rate (New liquidity management system).
Sight deposits became interest-bearing deposits as from 1 January 1991. Up to summer 1993, however, the interest rate on bank's overnight loans (D-loans) was Norges Bank's key rate. The banking system was in a permanent borrowing position vis-à-vis Norges Bank, and the interest rate on banks' overnight loans formed a floor for short-term money market rates. As from autumn 1993, the banking system was generally in a deposit position, and Norges Bank began to manage short-term money market rates within an interest rate corridor. The "ceiling" in the interest rate corridor was the interest rate on banks' overnight loans and the "floor" was the sight deposit rate. Norges Bank managed liquidity within the interest rate corridor with a view to keeping the krone exchange rate stable.
In the last half of the 1990s, the banking system's sight deposits in Norges Bank were large, and money market rates fell towards the floor of the interest rate corridor. Since then, short-term money market rates have for the most part remained somewhat above the sight deposit rate. Today, the sight deposit rate is defined as Norges Bank's key policy rate.
The difference between the overnight lending rate and the sight deposit rate was 2 percentage points from 3 August 1993 to 16 March 2007, when it was changed to 1 percentage point. The change had no effect on monetary policy, and was made because it was not considered necessary to have a difference of 2 percentage points.