Following a review, the Reserve Bank has assessed that Authorised Deposit-taking Institutions (ADIs)
using the Committed Liquidity Facility (CLF) can increase their reasonable holdings of high-quality
liquid assets (HQLA) from 26 to 27 per cent of the stock of HQLA securities by the end of
2020, and to 30 per cent of the stock of HQLA securities by the end of 2021. This assessment
reflects the increase in issuance of HQLA securities in 2020 and in prospect for 2021.[1]
As previously announced following the 2019 review of the
CLF, on 1 January 2021 the CLF fee will increase from 17 to 20 basis points per annum on the size of the
commitment to each ADI. The fee is set so that ADIs face similar financial
incentives to meet their liquidity requirements through the CLF or by holding HQLA.
Background
Since January 2015, the Reserve Bank has provided the CLF as part of Australia’s implementation of
the Basel III liquidity reforms. Under APRA’s liquidity standard, ADIs that are required to meet
the liquidity coverage ratio (LCR) need to hold enough HQLA to be able to respond to acute stress. The
Australian dollar securities that have been assessed by APRA to meet the requirements to be HQLA are
Australian Government Securities (AGS) and securities issued by the central borrowing authorities of the
states and territories (semis). The CLF is required because the supply of AGS and semis in Australia has
historically not been large relative to the value of HQLA that ADIs are required to hold under
APRA’s liquidity standard.
As an alternative to holding HQLA to meet the LCR, ADIs can apply to APRA to establish a CLF with the
Reserve Bank. This enables them to access a set amount of liquidity from the Reserve Bank under repo
against eligible securities as collateral. These ADIs are required to meet several conditions, including
paying the CLF fee. Each year, APRA sets the total size of the CLF by taking the difference between the
liquidity requirements of the CLF ADIs and the amount of HQLA securities that the Reserve Bank assesses
can be reasonably held by the CLF ADIs without unduly affecting market functioning. For more
information, see Committed Liquidity
Facility.
Endnote
Following an earlier review, in June 2019, the
Reserve Bank had assessed that ADIs using the CLF can increase their reasonable holdings of HQLA as a
share of the stock of HQLA securities at a pace of 1 percentage point per year from
25 per cent in 2019 to 30 per cent in 2024. See 2019 review of the
CLF.
This more gradual increase in reasonable holdings is no longer required given the large increase in
issuance of HQLA securities in 2020. [1]
