Cash Balance Management on the Bank of Russia Correspondent Account

Abstract

This article presents results from the research dedicated to development of a model of evaluation of necessary intraday cash reserve on a correspondent account in the Central Bank of the Russian Federation. The existing theoretical approaches to evaluation of necessary cash reserve were classified into two groups that consider costs and not consider costs. The results of their application on a commercial bank’s data let the authors conclude that only usage of the approach that taking into account costs allows reducing the examining commercial bank reserve management costs at permissible intraday liquidity risk. Key words: liquidity risk, bank reserves, commercial bank