What is the difference between the key rate and the refinancing rate?

Deposits The most common concepts financial system countries are the refinancing rate and the key rate. They are the main instruments used in the state's monetary policy. The Central Bank uses them when forming its credit policy, refinancing government and commercial banking institutions , as well as for other monetary transactions

. Let's figure out how the refinancing rate differs from the key rate.

In order to understand how these financial instruments differ from each other, you should understand what they are. Refinancing rate (discount rate) from its introduction in 1992 until the second half of 2013, it was the country's main financial instrument. This is an indicator characterizing the cost credit funds provided by the Central Bank, it is expressed as an annual percentage. By increasing or decreasing the value of this indicator, the Central Bank could indirectly regulate the amount of interest on loans, deposits and inter banking transactions

. Since 2003, the indicator began to determine the ceiling (maximum value) of the interest rate on operations to ensure liquidity in the money market, and the rates of one-day overnight loans were brought to its level.

construction.

In this case, accruals are made at the rate of 1/300, 1/360 or 1/150 part (in different situations) of the refinancing interest rate for each calendar day of the recorded violation.

  • The refinancing rate was also used in fiscal policy, that is, to determine the amount of certain taxes and penalties for non-payment. In particular, it was used in calculations:
  • income from material benefits in the presence of savings on interest on loans;
  • the amount of corporate income tax, incl. on interest expenses and their permissible interval for debt obligations;
  • the amount of penalties for violation of deadlines for payment of fees and taxes.

Key rate– this is the percentage at which the Central Bank provides and withdraws liquidity for a period of up to one week through a repo auction. These auctions are characterized by the fact that they trade securities, the condition for this is the obligation to sell them back at the price specified in the repurchase agreement. Consequently, such a transaction is an indirect short-term loan secured by bills, bonds or depositary receipts. This mechanism allows the Central Bank to receive income as a result of the difference in prices between sales and purchases with reduced risks, since the securities temporarily become the property of the lender during the loan.

The main reasons for establishing the key rate were to strengthen control over inflation rates and increase the level of investment attractiveness of the economy. It was introduced in September 2013 and has since become the main policy instrument of the Central Bank of the Russian Federation. With its help, the Central Bank of Russia can influence short-term operations (within 1-7 days).

In addition, the Bank of Russia introduced the so-called “interest rate corridor”, with a set width of 2 percentage points. Its boundaries are formed by operations using fixed interest rates for the provision of liquidity (upper) and its withdrawal (lower). The dynamic cost of borrowing is tied to the key rate. Accordingly, by adjusting the rate, the Bank of Russia can influence the cost of loans and deposits for households and businesses. This, in turn, affects the economy’s supply of money supply, bank liquidity, speed economic growth and the inflation rate.

Briefly, it looks like this. If the economy is very hot, consumer demand is high and the population is actively taking out loans, then prices for goods rise and the inflation flywheel spins up. In this case, the key rate increases, which entails an increase in the cost of loans, a decrease purchasing power residents and slowing inflation.

If the economy is in a state of stagnation, business activity is low, and there is deflation, then additional stimulation of the economy is required by injecting additional credit money. This is facilitated by lower rates. This approach is called “inflation targeting”; for its implementation, in fact, the concept of a key rate was introduced. At the same time, due to different visions of the economic situation and set goals, disagreements often arise between the Ministry economic development and trade and the Central Bank.

What are the differences between discount and key rates?

Both tools in question financial policy are regulated by the instructions of the Bank of Russia. These are the two main ways of regulating monetary relations in the state, used at different times. It should immediately be noted that today the key rate has come to the fore, while the accounting rate now performs an auxiliary function. They are very similar to each other, but there is a difference between them.

The differences between the key rate and the refinancing rate are as follows:

  • the discount rate was the main one until 2013, and the key one – starting from this period;
  • the refinancing rate indicated the maximum interest rate on banking operations of the Central Bank, and the key rate was oriented towards the middle of the Central Bank’s interest rate corridor for the withdrawal and provision of liquidity;
  • the refinancing rate reflected the cost of overnight loans, and the key rate reflected short-term repo auctions with a seven-day horizon;
  • regarding implementation additional functions: the discount rate is used to resolve certain issues of fiscal policy, as well as take into account penalties, fines and penalties, and the key rate is used to calculate maximum interest rates on debt obligations.

In the period from September 2013 to January 1, 2016, both indicators functioned in parallel, their rates were set separately and differed from each other. This in 2014-2015, in the context of the collapse of oil prices, led to distortions that led to the fact that it became more profitable for debtors to pay late fees than to formalize new loan to pay off their debt obligations. After this, the value of the refinancing rate itself is not approved, but is equated to the value of the key rate, and the instrument itself is used only to perform its additional functions. Over the past year and a half, the value of both indicators has been steadily decreasing and today is set at 9%.

The value of the key rate in Russia and other countries with developing economies (Turkey, Brazil, South Africa) is important for foreign portfolio investors ( investment funds), who are looking for a place for profitable investment of your capital. Such investments are called Carry Trade. The average Russian investor needs to know the dynamics of the value of this criterion, since it affects profitability OFZ bonds, as well as foreign exchange rates.

Before you learn about the difference between the key rate and the discount rate, you need to familiarize yourself with their definitions, as well as their areas of application.

Definition and Application

Key rate – determines minimum size percentage at which the Central Bank of the Russian Federation provides cash loans commercial banks for one week. In addition, it is the maximum indicator at which central bank accepts deposits from banking organizations. Used to set percentage bank loans, and also has a serious impact on the level of inflation and stock prices credit institutions(cm. ).

Discount rate - determines the amount of annual interest charged by the Central Bank or any other government authorities involved in monetary policy for providing cash loans to commercial lending institutions. Basically, such loans are provided to banks overnight, which allows them to maintain liquidity or fulfill existing obligations. It is one of the most effective tools for regulating the economic situation in the country.

Fiscal sense

The accounting and key rate, the difference between which lies, among other things, in the endowment of an accounting, fiscal function, manifested in the following points:

In case of failure to pay the tax within the allotted time, the debtor is assessed penalties in the amount of 1/300 of the Central Bank discount rate, daily until full repayment debt.

If the interest on the deposit exceeds the discount rate by 5% or more, then such a deposit is subject to personal income tax.

If the executed loan agreement does not specify the interest rate, then it is set in accordance with the refinancing rate.

Also, most of the fines prescribed in various contracts of private organizations are established in accordance with the size of the discount rate.

Key rate

This parameter directly affects the establishment of interest rates on issued cash loans for credit institutions. In addition, it has a significant impact on changes in inflation for domestic economy countries. The key rate is set by the Central Bank of the Russian Federation.

Currently, the key rate set in Russia is 7.25%.

Key rate and refinancing rate differences

Differences between the key rate and the accounting rate:

Meaning. The key rate determines the maximum rate that the Central Bank charges for providing cash loans. The discount rate determines the corridor by which the interest rate on loans is determined.

Operations carried out. It is carried out through intraday, pawnshop, non-market and overnight loans. The difference between the key rate is that it is used mainly at repo auctions within one week.

Possibilities. The refinancing rate can be used in fiscal operations.

Period of use. Initially, the Central Bank used the refinancing rate (from 1992 to 2013), then the key rate was introduced (from 2013 to the present).

Now you know how the key rate differs from the discount rate, and

Comparison of two instruments for regulating monetary and credit policy

Monetary policy is one of the directions of state policy in the economic sphere. It is managed by the Central Bank together with the government of the country through various activities aimed at organizing monetary and credit relations.

What is the difference between the key rate and the refinancing rate?

  • When the accounting indicator decreases, the economy is stimulated, which leads to an increase in demand for goods and services, and therefore leads to economic growth.
  • Changes in the key rate directly affect the level of inflation in the country, and also determines the interest rate on loans issued by commercial lending institutions.

Period of application and legislation

  • The refinancing rate was introduced in 1992.
  • The key rate was introduced in 2013.

The impact of changes in the lending rate of the Central Bank of Russia

In order to curb the rise in inflation, the Central Bank is pursuing a policy aimed at increasing these indicators. Thus, with a high indicator of the presented instrument, there is an increase in interest on loans issued. As a result, fewer loans are taken out, which leads to a decrease in the amount of money in circulation. How less money in circulation, the more expensive they become, and accordingly, the growth of inflation stops.

What is the role of the Central Bank rate?

This economic instrument currently serves as one of the most important indicators of the monetary policy pursued in the country. In addition, it is used in the field of taxation, to calculate penalties.

The difference between the key rate and the refinancing rate

Originally presented economic indicators had significant differences among themselves. However, starting in 2016, they were equalized.

History of changes carried out by the Central Bank of the Russian Federation

  • Initially, the key rate was introduced in 2013 and its size at that time was 5.5% per annum.
  • Subsequently, there was a gradual increase until the interest rate reached 17% per annum, which happened in 2014. This figure is currently the largest in the entire history of this economic indicator.
  • In the period from 2015 to the present, there has been a gradual decrease in the percentage. The current rate is 7.25% per annum.

Will the Central Bank provide loans?

The Central Bank of the Russian Federation provides cash loans only to commercial banking organizations within the total volume of issued loans, which is determined monetary policy states.

Loans issued by the Central Bank:

  • Intraday.
  • One-day (overnight).
  • Pawn shops.

What does an investor need to know when investing in the Russian economy?

If you are going to invest your money capital V Russian business, then you need to familiarize yourself with the following important parameters.

The influence of global financial regulators

Rates regulated by Central Banks are one of the essential tools, which directly affect the economic situation in the country and in the world. Greatest influence on the world financial market financial regulators are currently providing following institutions: Federal backup system USA, European Central Bank, Bank of England and Japan.

Thus, any meeting of the listed organizations, as well as decisions made at these meetings, can seriously change the situation on the global financial market in any direction.

Switch to key rate

Since the government's influence on the financial market is constantly being improved, new economic instruments are emerging as a result. Thus, in 2013, the Central Bank introduced a key rate, and three years later the accounting rate was equated to it. Thanks to these changes, a more convenient monetary policy instrument has emerged, which allows you to control the level of inflation at the required values.

The key rate, unlike the refinancing rate, allows the Central Bank to regulate the following economic indicators of the country:

  • State of bank liquidity.
  • The amount of money in circulation within the country.
  • The pace of economic development.

Downgrade or hold

What could a rate cut lead to:

More available loans. Because interest rate will be reduced, the possibility of obtaining a loan will increase significantly.

Business development within the country. Thanks to the fact that loans will become more accessible, the rapid development of domestic business will begin (see).

Rising inflation. By providing more loans, the amount of money in circulation will increase. Since there will be more money, its value will begin to decrease, which will lead to an increase in prices for various goods and to an increase in inflation.

Thus, a sharp decrease in the rate could lead to negative consequences for the country's economy. Therefore, it is necessary to pursue a balanced policy to gradually reduce interest rates, which is what the Central Bank of the Russian Federation is currently doing.

Carry Trade is a strategy according to which you can make a certain profit by trading on foreign exchange market due to different interest rates. Such operations are carried out by investors who have large sums of money available.

In which countries is it profitable to carry out Carry Trade?

Currently, most investors choose the following countries to implement the presented strategy: Egypt, South Africa, Turkey, Argentina, Brazil and Russia. The listed countries are suitable for Carry Trade due to the fact that the difference between their percentages and the USA is approximately 8%.

Is it profitable to engage in Carry Trade in Russia?

The Russian market cannot be considered as a reliable and long-term investment, since in the history of Russia, situations have occurred more than once as a result of which investors lost huge amounts of money and were unable to compensate for them due to market volatility. So ruble assets have a fairly high degree of risk for long-term investments.

  • In December 2014, in order to prevent increased inflation risks, the Central Bank immediately increased the key rate by 6.5%. This change was the largest in the history of the key rate in Russia.
  • The maximum key rate in Russia was 17%. Operated from 2014 to 2015.
  • The key rate and the refinancing rate were equalized in 2016, the differences in percentage between them are this moment does not exist.

On January 1, 2016, the Bank of Russia equated the refinancing rate to the key rate. However, many still do not understand the differences between the key rate and the refinancing rate, as well as in what cases to apply one or another rate. We suggest you figure it out.

Important in the article:

  • where the key rate and refinancing rate are applied;
  • differences between the key rate and the refinancing rate.

Key rate

The key rate has now been put into effect by the Central Bank Russian Federation(Bank of Russia) on the basis of the document it adopted “Information of the Bank of Russia dated September 13, 2013 “On the system of interest rate instruments of the monetary policy of the Bank of Russia.”

The key rate of the central bank appeared as part of the transition to an inflation targeting regime 1 in order to implement a set of measures to improve the system of monetary policy instruments. It is determined by unifying interest rates on operations to provide and absorb liquidity on an auction basis for a period of 1 week.

At the time of this decision, the Bank of Russia announced the key rate of monetary policy at an interest rate of 5.50 percent per annum.

  • How to prepare for a bank audit of a company's balance sheet

The width of the interest rate corridor, symmetrical relative to the key rate, is equal to two percentage points. This width is considered by the Central Bank as optimal for limiting the volatility of interest rates money market while maintaining incentives for the redistribution of funds in the interbank market.

That is, at the time of the decision to introduce the key rate (September 13, 2013), the lower limit of rates on the Bank of Russia’s permanent operations to absorb and provide liquidity for a period of 1 day was 4.5 percent per annum, the upper limit was 6.5 percent.

Over a period of less than two years, the key rate changed eight times, reaching 17 percent per annum (December 16, 2014). From June 14, 2016, the key rate is 10.5 percent per annum.

  • Tricks to help you comply with covenants

What does the key rate affect?

Using the key rate, the Bank of Russia regulates financial and credit relations, including subsequent interest rates on loans, deposits, settlements in relations with the banking sector of the economy, in the public sector, etc. Change established size the key rate directly affects further monetary relations in the commercial sphere, as well as inflation processes in the state.

What does an increase in the key rate lead to:

  • limiting inflation and devaluation national currency in conditions of market instability;
  • support financial stability in the state;
  • reducing the amount of financial speculation;
  • increase in rates deposits in commercial banks;
  • an increase in lending rates in commercial banks, which reduces the level of demand for lending;
  • slowdown in economic growth (lack of opportunity to take out “cheap” loans;
  • decline in production;
  • reduction in the number of jobs.

  • How to prepare for banking monitoring of company income and expenses

Goals and consequences of reducing the key rate:

  • moving away from inflation targeting;
  • reduction in the level of interest rates for lending in banks;
  • increase in deposits and funds on bank deposits;
  • increase money supply in the hands of the population;
  • increasing the volume of lending;
  • increasing the pace and volume of production.
  • economic growth, increase in gross internal product(GDP);
  • increase in inflation rates, weakening of the national currency.

As we see, the key rate today plays a significant role in the state’s monetary policy, while both processes of changing the key rate have their pros and cons. A decrease or increase in the key rate mainly depends on the situation in the country’s economy and on the reaction of the authorities state power and the Bank of Russia on these economic processes.

  • 15 dangerous terms of a loan agreement

Refinancing rate

The refinancing rate refers to the interest rate when the Central Bank provides loans to commercial banks. The refinancing rate was introduced on January 1, 1992 on the basis of Telegram of the Bank of Russia dated December 29, 1991 No. 216-91 “On the interest rate on Bank of Russia loans provided to commercial banks.”

Until June 1, 2015, interest on the use of other people’s property was also calculated at the refinancing rate. in cash in accordance with Article 395 of the Civil Code of the Russian Federation. From June 1, 2015, the amount of interest is determined by the average rates existing in the place of residence or location of the creditor bank interest by deposits individuals published by the Bank of Russia and which took place during the relevant periods. Currently, for example, in the Central Federal District, the average rate is 8.24 percent per annum, in the North Caucasus Federal District - 7.4 percent.

The refinancing rate is the rate at which, for tax purposes, is also used to calculate penalties and fines.

By the above-mentioned decision of the Bank of Russia (“Information of the Bank of Russia dated September 13, 2013 “On the system of interest-bearing instruments of the monetary policy of the Bank of Russia”), the Central Bank notified that by January 1, 2016, the Bank of Russia will adjust the refinancing rate to the level of the key rate; Moreover, until the specified date, the refinancing rate will be of secondary importance.

Thus, currently the refinancing rate completely coincides with the key rate - since June 14, 2016 it has been 10.5 percent per annum.

Differences between the key rate and the refinancing rate

In fact, the main difference between the key rate and the refinancing rate is that the refinancing rate is applied as annual interest provision by the Central Bank of Russia of loans to commercial banks, while the key rate is short-term, the interest on loans at the key rate is determined for a period of no more than a week (for operations of providing and absorbing liquidity on an auction basis for a period of 1 week).

The refinancing rate today has been brought into line with the key rate, the difference in these concepts has been de facto leveled. That is, there are no differences between the key rate and the refinancing rate now. Moreover, according to the Decree of the Government of the Russian Federation dated December 8, 2015 No. 1340 “On the application of the Bank of Russia key rate from January 1, 2016,” the Government of the Russian Federation decided that relations regulated by acts of the Government of the Russian Federation in which the Bank of Russia refinancing rate is used , from January 1, 2016, instead of the specified rate, the key rate of the Bank of Russia is applied, unless otherwise provided by federal law.

However, the concept of refinancing rate has not lost its legal meaning. The said Resolution of the Russian Government determined the use of the key rate instead of the refinancing rate only in relation to the by-laws adopted by it. From which it follows that the refinancing rate specified in the regulatory legal acts of the legislative authorities is subject to further application, albeit formally, the same amount as the key rate.

So, the refinancing rate still applies:

  • in tax legal relations;
  • when calculating penalties (clause 4 of article 75 Tax Code Russian Federation), accrual of interest payable to a taxpayer-organization in the event of an unlawful decision by the tax authority to suspend operations on its accounts (clause 9.2 of Article 76 of the Tax Code of the Russian Federation),
  • collection of a fine from the bank if the latter fails to fulfill instructions tax authority on the transfer of taxes, advance payments, fees, penalties, fines (clause 1 of Article 135 of the Tax Code of the Russian Federation),
  • as well as in other cases of determining the extent of responsibility in the implementation of tax legal relations.

The current refinancing rate is also used when determining the amount of interest on the amount of debt for the period of use of funds under monetary obligation, the parties to which are commercial organizations (clause 1 of Article 317.1 Civil Code Russian Federation).

Thus, we can conclude that at present there are actual differences between the refinancing rate and the key rate for the implementation of commercial organizations there is no entrepreneurial activity - both rates are the same. In the future, if this condition is changed (cancelled), it will be necessary to again navigate in which areas the key rate is applied, and in which the refinancing rate.

The following principle can serve as a guide in this case - the refinancing rate in 2018 was also set to determine the amount of financial liability (civil, tax), in most cases as the minimum possible interest, penalty, fine or penalty.

The main purpose of the key rate is relations regulated by the state and the Bank of Russia in the field of financing, lending, and control of inflation processes.

1 Inflation targeting is a set of monetary measures taken government agencies authorities in order to control the level of inflation in the country. The main tool for conducting monetary policy to maintain the planned level of inflation is manipulating the discount interest rate (refinancing rate).

The key rate has important differences from the same indicator for refinancing. Many people are interested in the concept of what each of these bets represents. Therefore, the topic of what differences they have is relevant today.

Key rate and refinancing rate: what is it in simple words

In simple words, both of these numbers reflect liquidity norms from the Central Bank. How financial instrument each of them has its own fundamental differences or vice versa – similarities. It is worth finding out in more detail what exactly the Central Bank means by these terms. According to Law No. 86, it is determined for the Bank of Russia through what instruments the Central Bank will conduct monetary policy. Among these tools will also be determined which percentage amount rates are relevant for various operations, how will operations be provided on international market, and how they are carried out.

The rate represents such a basic indicator as the interest rate for one annual period, which characterizes the credit monetary indicator Bank of Russia. By this concept, the calculation of this formula implies the value by which resources Central Bank Russia influenced the way the interest formula for interbank transactions changed, as well as credit and deposit.

The key formula is what interest rate was set as the value for providing and withdrawing liquidity on behalf of the Bank of Russia for an auction period of up to a week. This indicator was set in September 2013 so that the interest and credit policies of the Central Bank could be improved in terms of regulation. The difference between this formula is that in simple words, this percentage rate is used for a short time. For example, key form The calculation of the formula will last a day, several days, or at most one week.

The difference between the key rate and the refinancing rate

Having analyzed the difference between the key rate and refinancing, the meaning of these provisions becomes clear. Based on the official percentage formula, it is accepted credit ratio for Bank of Russia operations. The number for refinancing or another parameter makes a difference in what orientations the formulas for the bank's policy have. For example, both formulas will describe the main level of liquidity of the Central Bank, but will differ in how long the accounting period lasts.

The main differences between the refinancing norm and the key formula of the Central Bank are as follows:

  • Time of using the formula as a policy tool for the Bank of Russia: before September 2013 or vice versa – after September 2013;
  • Meaning: one number will indicate the maximum rate of the Central Bank, while the other will differ in that it will indicate the middle of the resignation corridor for the provision and withdrawal of liquidity;
  • Designation principles: the differences between the Central Bank's refinancing are that they apply to loans, and the key interest rate applies to auctions a week ago.

Also, in simple words, these concepts of the Central Bank have other differences. First financial indicator also relevant for calculating fines, penalties and other sanctions. Another rule determines what values ​​are the maximum for debt obligations under Art. 296 NK.

Discount rate and refinancing differences

For the first time in 1992, the concept of a refinancing rate was applied. Since that time, a new name has appeared, which is called the key one. As a rule, the latter indicator formulates the amount of loans that the economy allows to issue to different persons. This number also allows you to manage inflation and control the attraction of resources from commercial banks.

You need to understand that both of these concepts are relevant to the Central Bank in the sense that it uses them in credit policy. These parameters are accounting, which implies their influence on the value of money or a direct reflection of the value of money in the economy at one point or another in time. Since 2013, the term key% has been used, but their meaning differs at such a level that they cannot be used in the same context.

Key rate and refinancing rate differences

In order to understand the issue, the key rate of the Central Bank of the Russian Federation is the difference in the refinancing percentage, these two concepts should be described separately.

  1. The key rate is considered to be the one at which commercial Bank beret credit loan at the Central Bank. It is established with the aim of influencing other interests that accumulate in the country’s economy. Essentially, it is a financial instrument. Its term is one week - this is the period for which the loan is provided. They do not resort to this very often, since taking money from the Central Bank means signing that this organization has problems, and then one can expect deprivation of a license, resignation and other measures.
  2. As for refinancing, this is an annual percentage that regulates the percentage on loans issued to ordinary people, although it may be lower than the key percentage. In Russia, it is set at a certain level of 17%; accordingly, below this level, an ordinary citizen will not be able to obtain a loan.

What is the difference?

Refinance percentage used commercial banks for your own purposes, for example, to reduce your expenses, for repo, etc. And this affects ordinary people more strongly than the key % level. There is a relationship between these two concepts, but it only works in one direction. The key percentage does not change depending on fluctuations in the refinancing percentage, but there are changes in the opposite direction, that is, the refinancing percentage is an indicator.

What is it: in simple words?

For an ordinary person who is not an expert in economics and finance, only the refinancing indicator can be important, since any Russian bank will have the right to lend only within this value, not lower. Issue a loan for more than low percentage This is not possible, as this may result in a fine. For example: if the key indicator is 12%, then banks can offer loans at 15, 20, 30%, but not below 12%.

Key rate difference from refinancing rate

To understand the difference between the key rate and the refinancing rate, we should consider in more detail the impact of these concepts on loans and deposits, as well as what the Central Bank says about this.

Information from the Central Bank of Russia

It was decided to bring the two % levels into line by January 1, 2016, so as not to be confused in the future. Until this date, the refinancing percentage will still be secondary, and indicated in the documents more for reference. This order has not yet been fully implemented, and its implementation will last until September or December. It also needs to be said about income taxes that are paid if cash deposit was issued more than the main interest and another 5%, that is, 13.25%. This tax is paid on the resulting difference.

It is worth taking out loans at high interest rates

You should look at the situation in the country, because the key percentage is of primary importance, which implies that at one point it may become unprofitable for the client if the Central Bank of the Russian Federation makes an appropriate decision to increase it. Everyone strives not to lose their funds, and the main victim in this situation will always be the borrower, who is unlikely to be ready for the fact that the interest rate will increase.

The difference between the key rate and the refinancing rate in simple words

The first indicator is strictly established and is used for relations between the Central Bank and commercial organizations, while the second indicator is of greater importance for the economy, because it is used to ensure that the percentage falls within the required threshold, in addition, it is from this that the amount of tax that is paid is determined for exceeding it. The difference is that it is the refinancing rate indicator that should be taken into account - the penalty and other points are determined from it, sometimes two concepts are compared, and the key rate is taken as an example.

Bank financial instrument