The Central Bank hosted a practical seminar as part of the regular meeting of the Money Market Working Group, with the participation of experts from the European Bank for Reconstruction and Development (EBRD) and representatives of treasury departments of commercial banks.
The seminar focused on improving approaches to the pricing of financial instruments in the banking system, assessing interest rate expectations, as well as using derivative instruments to manage interest rate and foreign exchange risks.
The main objective of the event was to further improve asset and liability management practices in the banking system based on international experience, incorporate market expectations into the valuation of financial instruments, further develop the money market, and strengthen the monetary policy transmission mechanism.
During the seminar, it was noted that when pricing loans, deposits, and other financial instruments, commercial banks should take into account not only current market interest rates, but also market expectations for future periods, risk premia, liquidity conditions, and capital costs.
Practical approaches to assessing interest rate expectations were also discussed, including the use of the yield curve, expectations regarding the future path of the policy rate, and methods for calculating the present value of cash flows. It was explained that these approaches enable banks to price loan and deposit products more accurately and to manage mismatches between the maturities and repricing periods of assets and liabilities more effectively.
The role of interest rate swaps and other derivative instruments in managing interest rate risks in banks was reviewed separately. In particular, practical examples were used to explain how interest rate swaps can help reduce risks arising from fixed-rate liabilities or assets, stabilize banks’ net interest income, and expand opportunities for long-term financing.
At the same time, the importance of benchmark rates such as UZONIA in developing financial instruments in the national currency was emphasized. It was noted that introducing floating-rate loans, deposits, and bonds based on UZONIA, as well as managing interest rate risks through derivative instruments, would expand the banking system’s ability to manage risks through market-based mechanisms.
At the end of the seminar, it was emphasized that macroeconomic analysis, interest rate expectations, and the proper assessment of risks in the financial market are important factors in ensuring banks’ financial stability, effective asset and liability management, and greater adaptability to market conditions.
The Central Bank will continue to hold such practical dialogues and technical seminars with financial market participants on a systematic basis, further develop the money market, expand the use of benchmark rates, and strengthen banks’ capacity to manage interest rate risks.
