MNI POLICY: Norges Bank Steps Up Bank Liquidity Operations

-Norges Bank: Up To 12m Loans Operations For As Long As Needed

By David Robinson

     LONDON (MNI) - Norges Bank announced Thursday that it was extending its

provision of extraordinary F-loans, its primary instrument to supply liquidity

to the banking system, for as long as necessary.

     The move comes as one of a wave of central bank measures to keep pumping

liquidity into the system, to ensure that banks have as much cheap funding as

they require.

     Norges Bank said it would offer the F-loans with maturities extending to 12

months "for as long as is deemed appropriate" and that it "encourages banks to

use the lending facility to procure liquidity."

     The loans are provided to banks at close to the key policy rate. For

six-month loans the rate is the prevailing policy rate plus 15 basis points and

for 12-month ones the policy rate plus 30 basis points.

     F-loans are collateralised lending, allocated through auctions, with banks

submitting bids for the desired amounts. Norges Bank said the extraordinary

F-loan auctions would be fully allotted, with the first on March 19.

     In a statement earlier Norges Bank also opened the door to currency

intervention, with the kroner under intense pressure.

     Norges Bank said it is "continuously considering whether there is a need to

intervene in the market by purchasing Norwegian kroner," with recent current

moves exceptional by historic standards.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

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