The annualized interest rate at which commercial banks walked off with 120 billion rubles' ($57.5 million) worth of the Central Bank's three-month credits was a mere 90 percent -- 60 percent lower than the current refinancing rate.
The huge drop occurred July 27 because, for the first time since the auctions began in March, credits were issued under the so-called "Dutch system," in which the Central Bank set no lower limit on the interest rate.
Under the old system, known as "American," a lower limit was set in advance.
"When there was a lower limit, the Central Bank couldn't find out what the realistic rate was," said Vadim Yegorov, an analyst at the Moscow Interbank Currency Exchange. "But when they tried the new system, practice showed it to be unprofitable for the state."
Under the Dutch system, the banks apply for set sums in advance. They also specify the interest level acceptable to them. The banks that name the highest rate get credits first, but the final interest rate for all participants is that of the lowest successful bidder, who gets a credit last.
Yegorov said the 158 banks participating in the auction knew beforehand that there would be no lower limit.
"They could have formed an informal common strategy," he said, likening the credit auctions to the Finance Ministry's first attempts to sell treasury bills at his exchange.
In that instance a small number of brokers acted concertedly to bring down prices.
A Central Bank spokesperson said that the auction rules had been changed to make it easier for the bank to gauge demand for credit.
"This was a mere test, an experiment to check how high the demand is for our resources," Natalya Khomenko said Monday.
Khomenko said she did not know whether the next credit auction would be held under the Dutch system again, since the rules and date for the auction have not yet been set.
She added that since the Central Bank plans to continue lowering its refinancing rate, the bank's losses from the auction may ultimately be less significant than they appear to be now.
The state bank has gradually lowered the refinancing rate from 210 percent early this year to the current 150 percent.
"Besides, those credits are going to be invested in our economy, anyway," Khomenko said. "So we didn't quite waste them."
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