Open Market Operations (OMO), carried out by the central bank on its own initiative and at its own expense, are fundamental both from the point of view of operational management of the money market (stabilization of short-term interest rates and bank liquidity) and from the standpoint of long-term monetary policy. We especially emphasize that their distinctive feature is the initiative coming from the central bank (or its mandatory consent to carry out a particular operation).
Open market operations are a very flexible tool of monetary policy, since they are carried out with banks on a voluntary rather than a forced basis; assume any regularity and any type of assets. These transactions first change bank reserves and then, through the multiplier effect, affect the supply of credit and economic activity as a whole. For this reason, in the practice of monetary regulation, open market operations are considered an effective means of managing money supply and liquidity in the banking sector. They are also an effective means of promoting competition in the financial system.
Based on the purpose of the OER operations, they are divided as follows:
Corrective (protective) operations designed to compensate for short-term undesirable changes in the structure of bank reserves;
Structural operations aimed at long-term qualitative impact on the monetary sphere (changes in qualitative monetary conditions, such as the exchange rate of the national currency, etc.)
OER can be conducted at pre-announced trading sessions (including auctions) or at any time and in any volume at the discretion of the central bank. The following types of OER are distinguished:
Regular scheduled operations, in which the central bank announces in advance their holding (an auction for the sale of loans, deposits, etc.) for banks or for a wide range of participants;
Irregular operations used by the central bank as the need arises, for example in response to unexpected short-term disturbances in the economic equilibrium (and therefore cannot be planned in advance). They are divided into irregular planned and bilateral operations (which are not planned and information about which is not communicated to the banking public).
From the point of view of tactics for managing bank reserves, open market operations can be carried out in one of two ways: - active (fixing the volume of reserves and freely determining the price of resources (i.e. interest rate)) and passive: (fixing the interest rate when varying the volume of reserves) . Countries with well-developed money markets typically take a passive approach, although there have been exceptions in the past. The passive approach is now also becoming the norm in transition countries where markets have reached a certain level of development.
OER can be carried out in various ways:
1. transactions with securities;
2. lending by the central bank to commercial banks;
3. transactions with foreign currency.
1. Central bank operations with securities– a widely used, effective, flexible and responsive market instrument for monetary regulation. Unlike other regulatory methods and instruments, transactions with securities are the most predictable for the central bank, since the timing of their implementation and the volume of impact cause the expected reaction of the market. In this regard, they provide an effective impact on the money market and bank credit, and, consequently, on the economy as a whole.
Open market operations in securities are transactions involving the purchase or sale of fixed-interest securities by the central bank in order to increase or decrease the volume of reserves held by banks. These operations are carried out by the central bank on its own initiative and at its own expense.
To revive the economy, the central bank increases the demand for securities, causing money to flow into the economy. In other words, if the central bank purchases securities, the volume of banks’ own reserves and the banking system as a whole increases. If the goal of the central bank is to reduce bank reserves, then it acts on the market on the supply side of securities (binding excess liquidity). In this case, on the contrary, the reserves of commercial banks decrease, which increases the cost of credit and, therefore, reduces the possibility of increasing the money supply.
It is necessary to highlight two important points that make it possible for the central bank to achieve its goals:
Firstly, the operations of the central bank (unlike commercial banks) are not related to the priority of profitability, so they are carried out at the most attractive rates that commercial banks cannot offer.
Secondly, these operations are carried out with discount bonds, in which income and price are inversely related (the higher the price (rate), the lower the income on this security). Thus, the central bank, influencing the economic interests of the subjects of regulation, achieves its goals.
Transactions can be carried out on both the primary and secondary securities markets. In transition countries, in conditions of insufficient development of financial markets, as a rule, O Operations in the primary market are of greater importance. Gradually, with the formation and liberalization of the financial system, the main emphasis is shifted to the secondary market, where, compared to the primary market, the central bank is provided with greater flexibility and efficiency of regulatory operations.
The object of the transaction is reliable securities, such as debt obligations of the state treasury (Ministry of Finance), state corporations, largest national corporations and banks.
Transactions with securities vary depending on:
Terms of the transaction: purchase and sale “until maturity” or operations for a period with a mandatory reverse operation (purchase and sale of securities – “direct” transactions, sale and purchase of securities – “reverse” transactions);
Objects of the transaction: transactions with government or commercial bonds; marketable or non-marketable securities (the latter cannot be freely traded on the secondary market);
Transaction terms: short-term (up to 3 months), medium-term and long-term (over 1 year);
Areas of operations: banking or open market, primary or secondary market;
Methods for setting interest rates: they are determined by the Central Bank or the market;
Counterparty to the transaction (banks, non-banking institutions, financial sector as a whole);
Purposes of the operation (corrective or structural).
Transactions with securities can be of two main types: irreversible transactions - “until maturity”, in which securities change ownership forever, and bank reserves increase (reduce) forever; reversible - “term transactions”, in which securities change ownership for a while, and then return to the previous owner, reserves increase (decrease) temporarily.
The most popular are reversible transactions (REPO). Under a direct repurchase agreement, the central bank purchases securities from a bank with the condition of repurchasing these securities at a certain time and at a certain price. In reverse repo, the main operation is the sale of securities (reverse). In this case, the central bank sells securities to the bank on the condition that it buys them back at a predetermined price and within a certain time frame.
A repo temporarily relieves upward pressure on money market interest rates because it reduces the commercial banks' need for short-term money. And reverses temporarily ease the downward pressure on rates, since this type of operation reduces excess reserves of the banking system. As a result, unwanted money market distortions can be quickly eliminated through repos.
2. Central bank lending to commercial banks. Open market operations are also carried out in the credit market. The Central Bank can purposefully reduce the volume of banks' monetary resources by accepting excess liquidity into interest-bearing deposits. Increasing liquidity, on the contrary, involves the central bank issuing loans to commercial banks secured by securities.
The mechanism of influence of the central bank's credit policy on the banking system is that, firstly, the difficulty or facilitation of the ability of commercial banks to obtain a loan from the central bank affects the liquidity of credit institutions. Secondly, a change in the official rate means that commercial bank loans become more expensive or cheaper for bank clients, as the entire scale of interest rates on credit operations of the banking system changes. In addition, a change in the official central bank rate means a transition to a new monetary policy, which forces commercial banks to make the necessary adjustments to their activities.
Lombard loans, being the main form of providing loans to banks, are used both within the framework of open market operations and in the system of permanent mechanisms for regulating the liquidity of the banking system.
3. Transactions with foreign currency– are carried out both for the purpose of sterilizing excess money supply and for the purpose of increasing the supply of liquidity. The specificity of these operations is that the activity of their application in the practice of monetary regulation (in particular, as a means of binding excess money supply) depends on the presence of a sufficient volume of foreign reserves at the central bank.
The following types are distinguished:
– purchase and sale of currency without a mandatory reverse operation (most often used as structural operations, the purpose of which is a long-term impact on the exchange rate of the national currency);
– transactions for the purchase and sale of foreign currency by the central bank with the condition of a mandatory reverse transaction (SWAP). These operations are used by the central bank as corrective operations, since carried out for a short period of time, they allow regulating the current liquidity of banks, with virtually no impact on the exchange rate of the national currency. SWAPs, like repos, can be direct – “purchase-sale”, and reverse – “sale-purchase”.
Regardless of the option for conducting open market operations and the type of asset used, the central bank determines their conditions, terms and instruments. At the same time, commercial banks, subject to acceptance of the OER conditions, enter into relationships with the central bank on a voluntary basis. The choice of OER mechanism depends on the purposes of their implementation and the convenience (reliability) of the assets used. Most central banks prefer to use repos and pawn loans. As assets, most banks use government securities or other reliable obligations guaranteed by the government.
There are the following options for central bank tactics when using open market operations:
1. An increase in long-term demand for liquidity can be compensated by the central bank through direct operations - periodic direct purchases of long-term securities on a “to maturity” basis, the purchase of foreign currency, or an increase in the volume of short-term loans. Short-term demand for liquidity can be compensated by the central bank by increasing short-term loans. In addition, the central bank can make direct purchases of short-term securities, conduct direct short-term repos and swaps.
2. If banks face excess liquidity, the central bank can:
– offer banks a short-term deposit with the central bank on favorable terms;
– make a direct sale of bills with a very short maturity;
– sell bills with the condition of repurchase in the near future (short-term reverse repo);
– conduct short-term reverse swaps.
If the central bank is not sure about the duration of fluctuations in the demand for liquidity, then irregular operations (otherwise, fine-tuning operations) are more preferable, since they affect the market quickly and, as a rule, for a short time. In contrast, regular operations (rough tuning tools) are less efficient and take longer to complete. Therefore, in the event of liquidity demand shocks, they may require additional regulatory measures from the central bank.
In addition, as noted above, when carrying out any operations, the central bank must influence either the volume of liquidity (the rate is determined by the market) or the interest rate (banks independently determine the volume of liquidity). Thus, the central bank ensures that it receives feedback from the banking system and can assess the reliability, validity and, ultimately, the effectiveness of its regulatory actions.
Open market operations (OOP), carried out by the central bank on its own initiative, are fundamental both from the point of view of operational management of the money market (stabilization of short-term interest rates and bank liquidity) and from the point of view of long-term monetary policy. Their main distinguishing feature is the initiative of the central bank or its mandatory consent to carry out a particular operation.
Open market operations may be conducted at pre-announced trading sessions (including auctions) or at any time and in any volume at the discretion of the central bank.
Based on the frequency of implementation, the following types of OOP are distinguished:
- regular elective surgeries, the holding of which the central bank announces in advance (auction for the sale of loans, deposits, etc.);
- irregular operations, which are used by the central bank as needed, for example in response to unexpected short-term disturbances in economic equilibrium, and therefore cannot be planned in advance. They are divided into irregular scheduled (the date is unknown in advance) and bilateral transactions, which are not reported to other banks either before or after they are carried out.
According to the purpose, OOP is divided as follows:
- corrective (protective) operations designed to compensate for short-term undesirable changes in the structure of bank reserves;
- structural operations that aim to have a long-term qualitative impact on the monetary sphere (changes in qualitative monetary conditions, such as the exchange rate of the national currency, etc.).
Open market operations are divided into three main types:
Conducting transactions with securities;
Refinancing of commercial banks by the central bank;
Conducting transactions with foreign currency.
Central bank securities transactions represent the purchase or sale by the central bank on the open market of fixed-interest securities on its own initiative and for its own account.
To revive the economy, the Central Bank increases the demand for securities (money flows into the economy); if its goal is to reduce bank reserves, then it acts on the market on the supply side of securities (binding excess liquidity).
It is necessary to note two important points that make it possible for the central bank to achieve its goals. Firstly, the operations of the central bank (unlike commercial banks) are not related to the priority of profitability, so they are carried out at the most optimal prices that commercial banks cannot offer. Secondly, these operations are carried out with discount bonds, the income and price of which are inversely related (the higher the price (rate), the lower the income on this security). Thus
The central bank, influencing the economic interests of the subjects of regulation, achieves its goals.
Transactions with securities vary depending on the following criteria:
Terms of the transaction - purchase and sale “until maturity” or operations for a period with a mandatory reverse operation (purchase and sale of securities - “direct” transactions, sale and purchase - “reverse” transactions);
Objects of the transaction - transactions with government or commercial bonds; marketable or non-marketable securities (the latter cannot be freely traded on the secondary market);
Transaction terms - short-term (up to 3 months), medium-term and long-term (over 1 year);
Areas of operations - banking or open, primary or secondary market;
The methods for setting interest rates are determined by the Central Bank or the market.
Transactions with foreign currency are carried out with the aim of both sterilizing excess money supply and increasing the supply of liquidity. The frequency of these operations (particularly as a means of tying up excess money supply) depends on whether the central bank has sufficient foreign reserves.
The following types of foreign currency transactions are distinguished:
Purchase and sale by the central bank of foreign currency without a mandatory reverse transaction (most often used as structural transactions, the purpose of which is a long-term impact on the exchange rate of the national currency);
Purchase and sale of currency with the condition of mandatory reverse transaction. These operations are used by the central bank as corrective ones, since, carried out for a short period of time, they do not affect the exchange rate of the national currency.
Transactions with foreign currency, as well as with securities, can be direct (purchase and sale) and reverse (sale and purchase).
Thus, based on the types of open market operations considered, it is possible to determine the tactics of the central bank when using them:
1. An increase in long-term demand for liquidity can be compensated by the central bank through direct operations: periodic direct purchases “before maturity” of long-term securities, the purchase of foreign currency, and an increase in the volume of short-term loans. Short-term demand for liquidity can be offset by increasing the volume of short-term loans. In addition, the central bank can make direct purchases of short-term securities, conduct direct short-term repos and swaps.
2. If banks are faced with excess liquidity, the central bank has the right to: offer them a short-term deposit with the central bank on favorable terms; make a direct sale of bills with a very short maturity; sell bills with a condition of repurchase in the near future (short reverse repo); conduct short reverse swaps.
If the central bank is not sure about the duration of fluctuations in the demand for liquidity, then short-term operations (fine-tuning operations) are more preferable, since they affect the market for a short time. In addition, when carrying out any operations, the central bank must either influence the volume of liquidity (the rate is determined by the market), or set the interest rate and allow banks to independently determine the volume of liquidity. Consequently, the central bank, carrying out monetary regulation, makes it possible to obtain feedback (feedback) from the banking system and can assess the reliability, validity and, ultimately, the effectiveness of its actions.
Open market operations of the National Bank of the Republic of Belarus are provided in the following types.
Auction OOPs are the main instrument for regulating the liquidity of the banking system on the part of the National Bank, initiated by it and conducted on an auction basis in order to smooth out relatively long-term fluctuations in liquidity (up to 30 days for maintenance operations, up to 180 days for withdrawal of liquidity). Rates for auction operations can be determined either by the National Bank or on a competitive basis; no limits are set for them.
The following operations are carried out on an auction basis:
Purchase and sale of government securities and securities of the National Bank on repo terms;
Issue of short-term bonds by the National Bank; . deposit auction;
Pawnshop auction.
Bilateral OOPs are focused on limited liquidity support in banks in cases of unexpected significant outflows; are carried out on individual bank requests for a period of up to 14 days. A feature of these operations is the need to agree with the National Bank on the volume, refinancing period, as well as the type of instrument used. The rate for bilateral transactions is punitive; Limits on them are also not set.
The following operations are carried out on a bilateral basis: pawnshop loans at a fixed rate, purchases of foreign currency from banks on SWAP terms and operations on counter placement of deposits.
Structural adjustment operations include: purchase and sale of government securities, as well as NB securities on maturity terms. These operations are initiated by the National Bank and are carried out with the aim of adjusting long-term parameters of the money supply taking into account monetary policy targets. The rates for these operations are based on auction transactions; no limits are set for them.
Open market operations have long been known as a tool for increasing the efficiency of accounting (discount) policies. The peculiarity of open market operations is that they are carried out not at market interest rates, but at a predetermined exchange rate. Interest rates are set by the central bank differentially, depending on the maturity of government securities.
The influence of the central bank on the money market and the capital market is that, by changing interest rates on the open market, the bank creates favorable conditions for credit institutions to buy or sell government securities to increase their liquidity. In addition, open market operations are carried out between the central bank, on the one hand, and credit institutions, on the other. In addition, they are more adapted to short-term market fluctuations compared to accounting policies.
Thus, open market operations are the most flexible method of regulating the liquidity and lending capabilities of banks by placing public debt. These operations, which represent one of the forms of government financing, are used especially actively by the central bank during periods of growing federal and local budget deficits.
Open market operations as a method of monetary regulation of the economy are typical for countries such as the USA, Great Britain, Germany, France, Greece, and Italy.
10.4. Mandatory or minimum reserve policy
Historically, minimum reserves appeared in the form of liquidity insurance for credit institutions as a guarantee of customer deposits. As a method of monetary regulation of the economy, this policy is “administrative” and the most effective method of influencing the central bank on the cash volume of banks’ resources and lending capabilities compared to such “market” methods of regulation as accounting policies and open market policies.
Minimum reserve requirements are used in almost all industrialized countries, with the exception of the UK, Canada and Luxembourg. But in the application of this method of regulation in different countries there are significant differences associated with the national characteristics of the country’s economy. Prominent Western economists, such as the American economist P. Samuelson, consider the policy of mandatory or minimum reserves to be a strong and powerful tool of the central bank.
The essence of this policy lies in the establishment by the central bank of mandatory minimum reserves for credit institutions in the form of a certain percentage of the amount of their deposits, which are stored in an interest-free account with the central bank.
In some countries, the establishment of required reserve standards occurs on the basis of negotiations between the central bank and commercial banks of the country.
In many countries, cash assets of credit institutions are counted toward minimum reserves.
In different Western countries, there are significant differences in the mechanism for calculating reserve rates, as well as in the criteria by which they are differentiated. The main item in calculating minimum reserves is the amount of deposits of non-banking institutions (industrial, commercial enterprises) on the liability side of the balance sheet. For example, rates on required reserves of credit institutions in leading industrialized countries in 2001 were set at the following amounts:
UK - 0.45%
USA - 12% on demand deposits, 3% others,
France - 5.5% on demand deposits, 3% others,
Germany - from 4.15 to 12.1%,
Switzerland - 2.5%,
Japan - from 2.5 to 0.125%.
In some cases, when determining the amount of minimum reserves, interbank liabilities are also taken into account.
In general, one can note a significant difference between the rates on minimum reserves in different countries. For example, the Bank of England set a rate for credit institutions of only 0.45%, since it practically does not use minimum reserves as an instrument of monetary policy. The highest rates are set in Italy (25%) and Spain (17%). In countries with high reserve rates, minimum reserve obligations are not interest-free.
In some cases, credit institutions are exempt from complying with minimum reserve obligations. For example, in Germany, obligations related to import financing are excluded from the amount of minimum reserves.
The effectiveness of the regulatory instrument in the form of minimum (mandatory) reserves is determined by the breadth of their coverage of individual obligations. For example, in Germany, liabilities subject to minimum reserves include demand deposits, time deposits and savings deposits up to four years, as well as funds raised on the interbank money market and debt obligations (registered and bearer) for up to two years. The exception is obligations in relation to other institutions containing minimal reserves.
In countries with strict monetary targets, a correspondence is often established between bank liabilities determined by a given value of money supply development and deposits included in the calculation of minimum reserves. For example, the central banks of France, Spain, Japan, Sweden, Italy, as well as the Bundesbank of Germany, regulate the money supply based on targets, therefore, in these countries, reserve obligations apply to a significant part of the bank's balance sheet liabilities.
A similar principle applies to new financial instruments. Thus, in Japan, when establishing changes in the money supply index and required minimum reserves, certificates of deposit are taken into account. In the United States, liabilities subject to minimum reserves are covered by a strictly defined portion of the money supply.
In a number of countries, the establishment of minimum reserves in relation to deposits in foreign currency for non-residents has its own characteristics. For example, in the USA and Japan, in order to exclude evasion of obligations on minimum reserves, eurodeposits are included in the calculation of obligations in the USA, and in Japan - obligations in relation to official
offshore centers.
In Germany, when emergency measures were introduced during the period of strong pressure of foreign capital on the money market from September 16 to December 15, 1977, the required reserve requirements for non-residents were set at 80%, which changed the direction of capital movement in the other direction.
The instrument of required (minimum) reserves is also used by central banks to ensure the competitiveness of their commercial banks.
Thus, changing reserve requirements is an effective tool of monetary policy in all industrialized countries, which constantly adapts to changing conditions.
More on topic 10.3. Open market operations:
- Federal Open Market Committee (FOMC)
- Recording open market transactions on bank balance sheets
- 3. Open market operations (open market policy).
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A tool for flexible and prompt influence on the volume of liquid resources of commercial banks is open market operations. Open market operations refer to the buying and selling of government securities to change the money supply. By regulating the supply and demand for government securities, the effect of fluctuations in the volume of money supply in circulation, caused by the nature of the response actions of commercial banks, is achieved. Thus, the sale by a commercial bank of government chain securities narrows the free resources of the commercial bank for lending purposes, and the purchase, on the contrary, frees up resources and increases lending opportunities.
Conducting operations on the open market, known as open-market policy, began to be used since the 20s. XX century in the USA. The German bank carried them out since 1933, Great Britain - also in the 30s. Open market policies quickly gained popularity due to their high efficiency and flexibility, displacing other methods of monetary regulation.
Reducing the lending capabilities of commercial banks is advisable during periods of high market conditions, and increasing them during times of crisis. In a crisis situation, the central bank creates the possibility of refinancing for commercial banks. It puts them in a situation where selling securities to the central bank becomes profitable. There is a simultaneous change in the lending interest and liquidity of commercial banks. At the same time, purchasing securities from the Central Bank is advisable when there is low demand for commercial bank loans from firms and households. At the same time, the conditions of the central bank for the purchase of securities should be more favorable than the conditions for providing loans to the population and enterprises of the non-financial sector.
The success of the open market policy is facilitated by the development of financial market institutions in the West. Here, central banks operate alongside other lending institutions, including savings and investment companies and businesses. A strong liquidity reserve of commercial banks confirms its financial activity and can be ensured as high
Chapter 8. Monetary regulation
both profits and a large portfolio of high-yield securities.
There may be some differences in conducting open market transactions. Traditionally, the Bank of Germany sets the interest rates at which it is willing to buy securities. However, sales volume is not subject to regulation. On the contrary, in the USA and England, the Central Banks determine the volumes of purchase and sale, in accordance with which commercial banks will purchase securities from them. The interest rate here is determined indirectly and depends on the period for which government securities are placed.
The operation of purchasing securities on the terms of a reverse transaction has also found application in the implementation of open market policies. In this case, the Central Bank purchases securities from commercial banks for a period, after which commercial banks repurchase the sold securities at a discount, i.e. at a discount relative to the price of the original transaction. REGU transactions are carried out, which are also used in the relationships of commercial banks with clients. Here, one-day or term repurchase agreements involve the sale of highly liquid securities to banks (in the United States - the Treasury or a federal agency) on the terms of their redemption on another day (overnight) or for a longer period (from a week to a month) at a higher price. The premium to the value of the initial transaction constitutes the income of the commercial bank that provided credit to the client on the security of the transferred securities.
Carrying out an effective open market policy in the Russian Federation requires expanding the capacity of the financial market and adequate functioning of its mechanisms.
In the West, at different times, the main instruments for pursuing an open market policy were:
Treasury bills;
Government and local government debt obligations;
Interest-free treasury certificates;
Debt obligations admitted to exchange trading;
Special bills.
According to experts, after August 1998 the Bank of Russia was faced with the task of developing a mechanism for restoring financial
Part III. Banking intermediation: institutions and organization
of the new market, since open market operations are an important tool for regulating the liquidity of the banking system. Under these conditions, the Central Bank offered the market its own short-term zero-coupon bonds of Russia - OBR. These bonds are short-term in nature: circulation period is up to 3 months, maximum issue volume is 10 billion rubles. The Central Bank has provided commercial banks with the opportunity to use them as collateral for pawnshop, intraday and overnight loans.
At the stage of recovery of the financial market, the importance of the regulatory activities of the Central Bank of the Russian Federation increases. The government securities market should acquire a new qualitative level, expressed in the predictability of its dynamics and a reduction in the share of speculative transactions carried out. Securities that require a differentiated approach will be traded on it, for example:
Securities issued for the restructuring of GKO-OFZ;
New public debt instruments.
The circulation of municipal securities will continue, the prospects of which will largely be determined by the state of the regional economy and finances.
The position of the market for foreign currency government securities (Eurobonds, domestic foreign currency loan bonds, etc.) will only improve with an increase in Russia's credit rating. Assuming the gay to activate the sector of corporate debt obligations - mortgage-backed bonds, commercial bills, etc., which will allow for the transfer of capital from government securities into the corporate segment.
Cm." Fundamentals of banking (Banking) / Ed. K. R. Tagirbekova M.: INFRA-M; Publishing house "The Whole World", 2001. P. 92..
Related information.
6. Open market operations
Open market operations- this is another one of the Central Bank’s tools that it can use to implement economic changes. This instrument is widely used in countries where the securities market is sufficiently developed, and is unacceptable where the stock market is still on the verge of formation. Open market operations involve the purchase and sale of securities by the Central Bank (mainly short-term government bonds) on the secondary market. In some countries, legislation prohibits the activities of the Central Bank in the primary stock market.
When the Central Bank buys securities from commercial banks, it increases the amount in their reserve accounts. As a result, the volume of money with increased power grows, the monetary base grows and the money multiplier begins to work, which leads to an expansion of the money supply in circulation. This process depends on the share distribution of the increase in the money supply into cash (cash balances) and deposits that economic entities leave in the bank at a certain percentage. If the share of cash exceeds the deposit share, then monetary expansion should be limited, since an increase in cash leads to higher prices and an inflationary spiral.
If the Central Bank wants to withdraw some money from the economy, it sells bonds. Thus, a certain amount is withdrawn from commercial bank accounts, which then leads to a decrease in the money supply.
Very often, open market operations are carried out in a manner similar to repo transactions, concluded on buyback terms. Here the Central Bank sells commercial securities, promising to buy them back after a certain period of time at a higher cost. In this case, the profit of commercial banks is the difference between the initial sale amount and the subsequent purchase or redemption amount. In some countries, securities transactions are considered the most flexible instrument of monetary policy. They are carried out exclusively under the control of the state, quickly enough and can be adjusted as necessary.
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