The Reserve Bank of Australia (RBA) has confirmed it will form a committed liquidity facility (CLF) to assist in moving Australia's financial markets more in line with the Basel III liquidity reforms.

 

The facility, which is required because of the limited amount of government debt in Australia, is designed to ensure that participating authorised deposit-taking institutions (ADIs) have enough access to liquidity to respond to an acute stress scenario, as specified under the liquidity standard.  

 

The CLF will enable participating ADIs to access a pre-specified amount of liquidity by entering into repurchase agreements of eligible securities outside the Reserve Bank's normal market operations. To secure the Reserve Bank's commitment, ADIs will be required to pay ongoing fees. The Reserve Bank's commitment is contingent on the ADI having positive net worth in the opinion of the Bank, having consulted with APRA.

 

For the CLF, the Bank will purchase securities under repo at an interest rate set 25 basis points above the Board's target for the cash rate, in line with the current arrangements for the overnight repo facility.

 

More information can be found here