APRA announced the updated aggregate amounts for the 2021 Committed Liquidity Facility (CLF) established between the Reserve Bank of Australia (RBA) and certain locally incorporated authorized deposit-taking institutions that are subject to the Liquidity Coverage Ratio (LCR). After including the reductions that became effective on or before February 01, 2021, the total CLF amount allocated for 2021 is approximately AUD 139 billion. Authorized deposit-taking institutions have reduced their CLF allocations owing to the material improvements in funding and liquidity of authorized deposit-taking institutions as well as the substantial increases in government securities.
APRA invited all authorized deposit-taking institutions that are subject to LCR to apply for their 2021 CLF allocation, effective as at April 01, 2021. The amount of Australian Government Securities and securities issued by the borrowing authorities of the states and territories (AUD HQLA) has increased significantly and is projected to increase further. As a result, future CLF allocations are likely to decrease further. APRA expects to ensure measured CLF reductions to avoid financial market disruptions; however, it would be reasonable to expect that if government securities outstanding continue to increase beyond 2021, the CLF may no longer be required in the foreseeable future.
The LCR is a minimum requirement that aims to ensure that authorized deposit-taking institutions maintain sufficient unencumbered high-quality liquid assets (HQLA) to survive a severe liquidity stress scenario lasting for 30 calendar days. The LCR is part of the Basel III package of measures to strengthen the global banking system. The CLF is intended to be sufficient in size to compensate for the lack of sufficient available HQLA, which in Australia consist of mainly AGS and securities issued by the borrowing authorities of the states and territories.
Keywords: Asia Pacific, Australia, Banking, Committed Liquidity Facility, LCR, HQLA, Liquidity Risk, RBA, Basel, APRA
Previous ArticlePRA Issues Direction on Capital Buffers, Finalizes PS1/21 on SM&CR
EU published Directive 2021/338, which amends the Markets in Financial Instruments Directive (MiFID) II and the Capital Requirements Directives (CRD 4 and 5) to facilitate recovery from the COVID-19 crisis.
The Standing Committee of the European Free Trade Association (EFTA) recommended that a systemic risk buffer level of 4.5% for domestic exposures can be considered appropriate for addressing the identified systemic risks to the stability of the financial system in Norway.
In a recent statement, PRA clarified its approach to the application of certain EU regulatory technical standards and EBA guidelines on standardized and internal ratings-based approaches to credit risk, following the end of the Brexit transition.
In a recently published letter addressed to the G20 finance ministers and central bank governors, the FSB Chair Randal K. Quarles has set out the key FSB priorities for 2021.
EU published, in the Official Journal of the European Union, a corrigendum to the revised Capital Requirements Regulation (CRR2 or Regulation 2019/876).
ESAs published a joint supervisory statement on the effective and consistent application and on national supervision of the regulation on sustainability-related disclosures in the financial services sector (SFDR).
EC published a public consultation on the review of crisis management and deposit insurance frameworks in EU.
HKMA announced that enhancements will be made to the Special 100% Loan Guarantee of the SME Financing Guarantee Scheme (SFGS) and the application period will be extended to December 31, 2021.
EBA launched consultations on the regulatory and implementing technical standards on cooperation and information exchange between competent authorities involved in prudential supervision of investment firms.
BoE issued a letter to the CEOs of eight major UK banks that are in scope of the first Resolvability Assessment Framework (RAF) reporting and disclosure cycle.