APRA Announces Reduction in Committed Liquidity Facility for Banks
APRA announced a $35 billion reduction in the aggregate amount in the 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), from the amount at the start of 2020. Due to material improvements in the funding and liquidity of authorized deposit-taking institutions, along with the substantial high-quality liquid assets (HQLA) increases due to unforeseen increases in government debt since the January 2020 CLF allocations, all locally incorporated LCR-authorized deposit-taking institutions were invited to apply for a reduction in their CLF, effective on or before December 31, 2020. Five authorized deposit-taking institutions applied for a reduction, thus reducing the aggregate CLF allocated to authorized deposit-taking institutions from $223 billion at January 01, 2020 to $188 billion.
The amount of Australian Government Securities (ASIC) and Semi-Government securities issued by the State and Territory governments (AUD HQLA) increased significantly and is projected to increase further based on the government’s recent budget announcement. As a result, APRA CLF allocations for 2021 will 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, which are targeted to be effective from December 01, applications for the 2021 CLF are due to be submitted to APRA in December 2020. APRA will endeavor to announce the aggregate results of those applications by the end of first quarter of 2021.
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 a 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 (AGS and semis). Authorized deposit-taking institutions are required to make every reasonable effort to manage their liquidity risk through their own balance sheet management before applying for a CLF.
Related Links
Keywords: Asia Pacific, Australia, Banking, Committed Liquidity Facility, CLF, LCR, HQLA, Liquidity Risk, Basel, RBA, APRA
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.

Karen Moss
Senior practitioner in asset and liability management (ALM) and liquidity risk who assists banking clients in advancing their treasury and balance sheet management objectives
Previous Article
IAIS Consults on Principles for Assessment of Aggregation MethodRelated Articles
EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
EP Reaches Agreement on Corporate Sustainability Reporting Directive
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).
PRA Consults on Model Risk Management Principles for Banks
The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.
EC Regulation Amends Standards for Calculating Credit Risk Adjustments
The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
BIS Hub Updates Work Program for 2022, Announces New Projects
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
EIOPA Issues Cyber Underwriting Proposal, Statement on Open Insurance
The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.
US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
EIOPA Consults on Review of Securitization Framework in Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
UK Authorities Issue Regulatory and Reporting Updates for Banks
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.
BCBS Issues Climate Risk Principles while HKMA Expresses Its Support
The Basel Committee on Banking Supervision (BCBS) issued principles for the effective management and supervision of climate-related financial risks.