Rewcent figures show that commercial banks’ liquidity position remains volatile, as daily excess reserves averaged K8.42 billion during the week ended August 4.
This is a drop from a daily average of K29.91 billion in the preceding week, according to a weekly market update from financial advisory and asset management firm, Nico Asset Managers.
As a result, the update shows, the volume of interbank overnight borrowing increased to an average of K42 billion at 21.75 percent from K27.22 billion at 20.50 percent.
“Access to the Lombard facility during the week in review averaged K139.94 billion at an average rate of 24.20 percent from K123.91 billion at an average of 22.20 percent,” the update reads.
In an interview, Bankers Association of Malawi Chief Executive Officer Lyness Nkungula said the liquidity position has been worsened by the recent adjustment in liquidity reserve requirement, which requires banks to set aside 7.75 percent of deposits and place the same with RBM.
- Advertisement -
Nkungula said commercial banks are utilising the Lombard facility to facilitate day to day operations.
She said to access the window, a bank is required to pledge government securities. “So, this is an indication that banks are still holding liquid assets that they could sell off to cover the liquidity gap.
“Therefore, this is not a threatening situation and commercial banks in the country just need to cough up more in interest expense to cover this expensive borrowing,” Nkungula said.
