APRA Publishes Details on Committed Liquidity Facility for LCR Banks
APRA released aggregate results on the Committed Liquidity Facility (CLF) established between the Reserve Bank of Australia (RBA) and certain locally incorporated deposit-taking institutions that are subject to the liquidity coverage ratio (LCR). All locally incorporated LCR authorized deposit-taking institutions were invited to apply for a CLF amount, which is to take effect on January 01, 2020. All fifteen authorized deposit-taking institutions chose to apply. Following the assessment of applications by APRA, the aggregate net cash outflow of the fifteen institutions was estimated at approximately AUD 378 billion.
The total CLF amount allocated for 2020 (including an allowance for buffers over the minimum 100% requirement) is approximately AUD 23 billion. APRA and the RBA, in December 2010, had announced that authorized deposit-taking institutions subject to the LCR will be able to establish a CLF with the RBA. The CLF is intended to be sufficient in size to compensate for the lack of sufficient high-quality liquid assets, or HQLA, (mainly Australian government securities and securities issued by the borrowing authorities of the states and territories) in Australia for authorized deposit taking institutions to meet their LCR requirements. The 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 for LCR purposes.
The CLF is required due to the low level of government debt in Australia. This limits the amount of high-quality liquid assets that financial institutions can reasonably hold as a buffer against periods of liquidity stress. Under the CLF, the Reserve Bank commits to providing a set amount of liquidity to institutions, subject to them satisfying several conditions. These include having paid a fee on the committed amount. So far, no financial institution has needed to draw on the CLF in response to a period of financial stress. The CLF has been in operation for five years and continues to be required, given the still relatively low level of government debt in Australia.
The LCR is part of the Basel III package of measures to strengthen the global banking system. The LCR is a minimum requirement that aims to ensure that authorized deposit-taking institutions maintain sufficient unencumbered high-quality liquid assets to survive a severe liquidity stress scenario lasting for 30 calendar days. APRA implemented the LCR on January 01, 2015.
Related Link: CLF Update (PDF)
Keywords: Asia Pacific, Australia, Banking, Committed Liquidity Facility, LCR, Basel III, HQLA, Liquidity Risk, 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
IFSB Consults on Guidance Note for Shariah-Compliant LOLR FacilitiesRelated Articles
OSFI Discusses Benchmark Rate Transition, Sets Out Work Priorities
The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.
EBA Proposes Standards to Support Secondary NPL Markets
The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.
EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution
The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).
EBA Issues Standards for Crowdfunding Service Providers Under ECSPR
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.
EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution
The European Securities and Markets Authority (ESMA) published a paper that examines the systemic risk posed by increasing use of cloud services, along with the potential policy options to mitigate this risk.
EC Consults on PSD2 and Open Finance; EU Reaches Agreement on DORA
The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.
EC Mandates ESAs to Propose Amendments to SFDR Technical Standards
The European Commission (EC) has issued two letters mandating the European Supervisory Authorities (ESAs) to jointly propose amendments to the regulatory technical standards under Sustainable Finance Disclosure Regulation or SFDR.
EBA Examines Supervisory Practices, Issues Deposits Reporting Template
The European Banking Authority (EBA) published its annual report on convergence of supervisory practices for 2021. Additionally, following a request from the European Commission (EC),
SNB Updates NSFR Forms and FINMA Consults on Operational Risk Circular
The Swiss National Bank (SNB) published Version 1.2 of the reporting forms (NSFR_G and NSFR_P) on the net stable funding ratio (NSFR) of banks, along with the associated documentation.
US Agency Publications Address Basel, Reporting, and CECL Developments
The Farm Credit Administration published, in the Federal Register, the final rule on implementation of the Current Expected Credit Losses (CECL) methodology for allowances
