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Interbank Market

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They are markets where only intersect operations with high liquidity assets between credit institutions, the Bank of Spain and occasionally some other kind of financial entities (wholesale markets) Functions of interbank Markets Helps the participating institutions to:

  • More effectively manage their surplus cash
  • Cover possible mismatches in meeting the cash reserve ratio,
  • Lending Finance (ie leverage).
  • They provide a basis for control operations of the Bank of Spain (eg Certificates of  Bank  Spain).
  • They are a basic reference point for the gold price formation in markets.
  • Important indicator of the monetary and financial situation in a country: are the first markets that receive the signals given by the monetary authorities to the whole of the financial system.

  History of the interbank market in Spain The origin of the interbank market in Spain is in deposit accounts that savings banks opened in banks (i.e. it's deposits that an entity in another). It spreads from 1971-72, to increase the number of participants and in 1976 they were already involved in these markets all banks, savings banks and credit cooperatives more important. In the banking crisis of the late 70s appear "blacklisted" in which includes those banks, savings banks and credit unions with problems, and of this form they had not the resources necessary  to finance through the interbank. There is a "spectacular growth" in the 1980s, especially from 1985 (as seen with the following details, where mainly the operations are a day): -          Savings banks have been suppliers of funds to the interbank market. -           Banking in the period 1980 - 96 has been demanding funds altogether (mostly foreign banks due to the discrimination until 1993, one of them was not to capture more than 40 percent of their financing in the market traditional (home, business,...), having to go outside or look in other markets (in 96 foreign banks cannot compete with the funds of banks or savings banks, in addition to the drop in interest rates). Causes of the strong development of the interbank market

  1. The development of the Spanish financial system (liberalization, new markets, new instruments, new institutions,...).
  2. Changes in monetary policy (the intermediate target variable passes M3 to M4, the coefficient of box until 1990 was a regulatory instrument for liquidity,...).
  3. Opening of the Spanish financial system to foreign banks.
  4. Appearance of specialized institutions, as the mediating societies of the money market: these entities were part of the ECAOL, and were created in 1981 with the function of dealer (assuming risks), disappearing in 1995 before the need for the ECAOL it should become for credit financial entities, since its scope was limited, and opted to be absorbed by any bank or become banks (are the only entities that disappear in the ECAOL change to ENF).

  Types of interbank markets Therefore, INTERBANK markets are differentiated: 1. TRADITIONAL INTERBANK MARKET OF DEPOSITS. 2. INTERBANK MARKET OF TRANSFERABLE DEPOSITS (DIT´S): In recent years (with the consequences of the reform of the coefficient of box, falling interest rates,...), interbank markets have stabilized their volume of business, and there have been attempts to relaunch it, the most significant being the creation of the DIT´S in 1992. 3. INTERBANK MARKET OF THE BANK OF SPAIN  certificates: only negotiable between banks. 4 INTERBANK MARKET OF AFIR (AGREEMENTS OF FUTURES ON INTEREST RATE): Operations consist of the 2 Contracting Parties agree at a given time t0 the settlement at a future date t1 of the differential between the interest rate agreed on t0 and the interest rate of liquidation in t1, where Q is the amount that in t1 receive.   Operations in interbank markets The OPERATIONS often held in the INTERBANK MARKETS (Mainly in the Interbank deposits): 1. Operations of pure deposits : refers only to deposits operations, paying VAT for the operation. 2. Operations of doubles: this is the buying and selling of an asset with Pact of retrocession (purchase or sale). Until the emergence of VAT were not taxed, but from the 86 lose the tax advantage, but nevertheless do not disappear still being carried out and they are still being carried out because: - In situations of atony (or weakness) of the demand for credit, allow banks to obtain temporary liquidity, transmitting their temporary transfers of assets to the private sector. - There are certain entities that participate in the interbank, which are the only way to finance, especially for small entities with these operations [caption id="" align="alignnone" width="640"]Headquarters of the Bank of Spain in Avila Headquarters of the Bank of Spain in Avila - Wikipedia.org - Author: Zarateman[/caption]  

Erick Gálvez
Author: Erick GálvezWebsite: http://www.asdforex..comEmail: This email address is being protected from spambots. You need JavaScript enabled to view it.
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