APRA announced a reduction of AUD 46 billion in the aggregate amount in the Committed Liquidity Facility (CLF) of banks. Considering the improvements in funding and liquidity and the substantial high-quality liquid assets (HQLA) increases, all locally incorporated authorized deposit-taking institutions that are subject to Liquidity Coverage Ratio (LCR) were invited to apply for a reduction in their CLF. Further to last round of reduction, which was effective from December 01, 2020, seven authorized deposit-taking institutions applied for a reduction, thus reducing their allocated aggregate CLF from AUD 188 billion to AUD 142 billion, effective on or before February 01, 2021. APRA also released an optional template to provide structured feedback on the draft Reporting Standard ARS 220.0 on credit risk management.
The amount of Australian Government Securities and Semi-Government securities issued by the State and Territory governments (AUD HQLA) has increased significantly and is projected to increase further. As a result, APRA CLF allocations will likely decrease further. While APRA expects to ensure measured CLF reductions to avoid financial market disruptions, 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. Further to this round of reductions, the applications for 2021 CLFs will be assessed in early 2021 for implementation on April 01, 2021. APRA expects further reduction to CLFs at this time. APRA will endeavor to announce the aggregate results of those applications by the end of first quarter of 2021.
The CLF was established between the Reserve Bank of Australia (RBA) and certain locally incorporated authorized deposit-taking institutions that are subject to LCR. The LCR is a minimum requirement that aims to ensure that authorized deposit-taking institutions maintain sufficient unencumbered 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 consists of mainly Australian Government Securities and securities issued by the borrowing authorities of the states and territories.
- News Release on Liquidity Facility
- Letter on Liquidity Facility (PDF)
- News Release on Optional Template (DOCX)
Keywords: Asia Pacific, Australia, Banking, Committed Liquidity Facility, CLF, LCR, HQLA, Liquidity Risk, RBA, Basel, Credit Risk, ARS 220, APRA
Previous ArticleSRB Industry Dialog Covers MREL Policy, Resolution Planning, and SRF
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.