Open market operations

Open market operations are the most important monetary policy instrument of the NBR. They are conducted at the central bank's initiative and play a role in steering interest rates, managing liquidity conditions in the money market and signaling the monetary policy stance. According to the regulations in force , the main categories of open market operations available to the NBR are:

repo operations - liquidity-providing reverse transactions whereby the National Bank of Romania buys eligible assets from credit institutions upon their commitment to repurchase the assets at the date and the price agreed on the date the transaction was concluded;
deposit-taking operations - liquidity-absorbing transactions with pre-specified maturity whereby the National Bank of Romania takes deposits from credit institutions;
issuance of certificates of deposit - liquidity-absorbing transaction whereby the National Bank of Romania sells certificates of deposits to credit institutions;
reverse repo operations - liquidity-absorbing reverse transactions whereby the National Bank of Romania sells eligible assets to credit institutions, thereby committing itself to repurchase the assets at the date and the price agreed on the date the transaction was concluded;
credit operations against eligible assets as collateral - liquidity-providing reverse transactions whereby the National Bank of Romania grants loans to credit institutions that remain the owners of the underlying assets
outright sales/purchases of eligible assets - liquidity-absorbing/providing transactions whereby the National Bank of Romania sells/buys eligible assets whose ownership is transferred from seller to buyer on a "delivery versus payment" basis;
foreign exchange swaps - consist of two simultaneous transactions concluded with the same counterparty, whereby the National Bank of Romania:

buys foreign currency spot against lei, for liquidity-providing purposes, and sells at a later date the same amount of foreign currency forward against lei; or

sells foreign currency spot against lei, for liquidity-absorbing purposes, and buys at a later date the same amount of foreign currency forward against lei.

During June 1997 - 2008 Q3, open market operations conducted by the NBR were almost exclusively used with a view to mopping up excess liquidity in the banking system. In 2008 Q4, against the background of a continued decline in the structural liquidity surplus in the banking system, banks’ net liquidity position turned negative (further information, Romanian only: Managementul lichidităţii din sistemul bancar); hence, liquidity-providing operations were given the main role in managing liquidity and steering short term interest rates. Subsequently, ample movements in autonomous liquidity factors resulted in swings between periods characterized by negative/positive net liquidity position of banks, which in turn led to the alternation, not necessarily synchronized, of operational liquidity position, i.e. the direction of the main open market instrument used by central bank (see NBR’s open-market operations to which the monetary policy interest rate is attached).