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Norges Bank
Norsk（https://www.norges-bank.no/kort-forklart/styringsrenten/hvordan-pavirker-styringsrenten-andre-renter/）
Explainers
Explainer
How does the policy rate influence other interest rates?
The policy rate only applies to banks’ deposits in Norges Bank. The policy rate does, however, influence interest rates in the wider economy. Find out more here.
Who receives the policy rate?
Norges Bank is Norway’s central bank – the bankers’ bank. Banks settle payments to each other by transferring deposits between their accounts in Norges Bank.
Once the Monetary Policy and Financial Stability Committee determines the policy rate, this means in practice that the Committee sets the banks’ deposit rates in Norges Bank up to a certain amount, ie a quota.
If a bank’s deposits exceed the bank’s quota, it receives a lower rate on its deposits in excess of the quota. This rate is called the reserve rate.
If a bank does not have deposits but needs to borrow from Norges Bank to settle its payments, the bank has to pay a lending rate. This rate is called the overnight lending rate or the D-loan rate.
How do banks distribute deposits among themselves?
Throughout the day, banks’ customers (households and firms) transfer money to each other in millions of different transactions. The final settlement from one bank to another always takes place through Norges Bank. When banks receive customer deposits, banks’ deposits are increased in Norges Bank. When banks transfer customer deposits, banks’ deposits are reduced in Norges Bank.
At the end of the day, banks with more deposits than their quota receive a lower rate on their deposits in excess of the quota, whereas banks with deposits below the quota need to borrow from Norges Bank at the overnight lending rate.
In both cases, it is more profitable for these banks to redistribute deposits among themselves so that their deposits only earn the policy rate. Thus, banks with excess deposits lend to banks with room in their quota at a rate equal to the policy rate.
This is how the policy rate also influences loans between banks. Interest rates on interbank loans then in turn influence credit and deposit rates offered by banks to their customers, such as rates on residential mortgages and savings accounts.
How does Norges Bank control the size of banks’ deposits?