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. Last Updated: 07/27/2016

Central Bank Executive Sees a Spike in Refinancing Demand

SOCHI -- The Central Bank expects daily refinancing demand to soar to 300 billion to 400 billion rubles ($11.7 billion to $15.6 billion) in October through November, but will ensure that the banking sector has enough liquidity, a top official said Thursday.

"We can give a 100 percent guarantee that the necessary liquidity will be provided," Central Bank first deputy chief Alexei Ulyukayev told reporters.

The Central Bank won praise from economists last month for its management of money-market volatility with its refinancing tools. It also adjusted the ruble's managed float policy, allowing some exchange-rate fluctuations.

Russian banks, whose total foreign borrowing stands at 15 percent of their combined liabilities, are vulnerable to a change in global liquidity conditions. In August, some midsized private banks stopped issuing home loans.

Liquidity problems become especially acute at the end of each month, when big Russian firms have to pay taxes. Problems have eased since then, as the Central Bank injected only 2.6 billion rubles at its first repo auction Thursday at a rate of 6.04 percent, down from a daily record of 270 billion rubles in late August.

But Ulyukayev said liquidity could become a problem again closer to the end of October and November. He did not say why liquidity demand would not peak in September.

"The refinancing system has proved its total readiness to work in any circumstances. We have been releasing 300 billion rubles per day without any problem in an automatic regime," he said.

Ulyukayev also said net capital inflows amounted to $59 billion in January through August after net outflows of $5.5 billion in August on the back of the global market turmoil.

The outflows had been expected to hit $10 billion in August.