Open market operations

The NBS implements open market operations by the purchase and sale of securities in order to regulate banking sector liquidity, influence movements in short-term interest rates and signal the monetary policy stance.

Types of open market operations

Depending on their objectives, dynamics and manner of implementation, open market operations of the NBS may be classified into:

• main operations,
• longer-term operations,
• fine-tuning operations.

Main operations play the most important role in terms of achieving the objectives of open market operations. They are reverse repo transactions – repo sale of securities, with the maturity of one-week. The NBS implements the main operations with a regular frequency, at standard auctions held according to a pre-determined calendar. These operations are conducted at the NBS key policy rate.

Longer-term operations aim to provide liquidity to the banking sector and/or absorb excess liquidity in the longer run. They are implemented at standard auctions.

Fine-tuning operations are implemented on as needed basis, to prevent or ease swings in banking sector liquidity, and particularly their effect on short-term interest rates. As a rule, they are conducted at quick auctions, i.e. on the day a decision is made to hold an auction.

Main characteristics of open market operations

1. Auction trading in securities between the NBS and banks is performed via the web platform NBS Monetary Operations.
2. Eligible for auction trading are dinar securities not indexed to a foreign currency, issued by the NBS, the Republic of Serbia, an international financial organisation and development bank or a financial institution founded by a foreign government, with the credit rating of “AAA” by Standard & Poor’s or Fitch-IBCA , or “Aaa” by Moody’s and a domestic company with a solvency rating of minimum “(D) Eligible solvency” as assigned by the Serbian Registers Agency or with other solvency/creditworthiness rating equivalent to “(D) Eligible solvency”.
3. Auctions may be fixed rate auctions (where securities are purchased/sold at a fixed interest rate predefined and announced by the NBS) and variable rate auctions (where securities are purchased/sold at an interest rate set based on supply and demand in trade transactions).
4. All banks meeting the prescribed requirements may take part in the purchase/sale transactions with the NBS.
5. Clearing and settlement of liabilities and claims in securities and cash on the grounds of concluded purchase/sale transactions are performed by the Central Securities Depository and Clearing House by the delivery versus payment model.