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Central bank says forex reserve decline has stopped

The Slovak central bank said on March 5 it expected no further significant decline in the hard currency reserves of the country's commercial banks. Earlier, the central bank (NBS) had reported that the foreign exchange reserves of Slovakia's commercial banks fell around $0.9 billion in the week between February 24 and March 3, pulling Slovakia's total reserves, including those of commercial banks, down to $4.64 billion from $5.6 billion.

"The foreign exchange reserves of commercial banks have probably settled down at their natural level, and the NBS does not expect a further significant decline in the upcoming period," the NBS said in a statement.

Commercial banks' reserves have fallen to $1.75 billion from $3.24 billion since February 17. "The decline [over the past two weeks] was related to the decision by the National Bank of Slovakia Banking Council to abolish the [required] foreign currency position of banks for monetary purposes," the bank said without elaborating.

It said that before the decision, some commercial banks had artificially increased their assets along with their liabilities to meet the foreign currency position coefficients required previously by the central bank.

Last week, the NBS said it therefore considered the reserves decline purely technical. "The decline in foreign currency reserves of the banking sector has no impact on the currency and does not affect the monetary policy of the central bank," the bank said.

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