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South African Reserve Bank

Monetary Policy Implementation 

The Financial Markets Department of the Bank is responsible for the implementation of monetary policy. The Bank has opted for a classical cash reserve system as a framework for its monetary policy implementation. In this framework an appropriate liquidity requirement or structural money market shortage is created by levying a cash reserve requirement on banks.

The main refinancing operation is the weekly seven day repurchase auction, which is conducted with the commercial banks, at the repo (policy) rate as determined by the Monetary Policy Committee. The Bank lends funds to the banks against eligible collateral, which comprises assets that also qualify as liquid assets in terms of the prudential liquid asset requirement.

In addition to the main repo facility, the Bank offers a range of end-of-day facilities for the commercial banks to square-off the daily positions on their settlement accounts, e.g. access to their cash reserve balances held with the Bank, supplementary repos/ reverse repos conducted at the repo rate and an automated standing facility whereby the end-of-day balances on the banks' settlement accounts are automatically settled at a rate of 100 basis points below or above the policy rate. 

A range of open market operations are also conducted to manage the liquidity in the market in order to give effect to the Bank's monetary policy stance. The open market operations include the issuance of SARB debentures, reverse repos, the movement of public sector funds between the market and the Bank and the conducting of money market swaps in the foreign exchange market.
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