RBA adjusts liquidity backstop for banks

The Reserve Bank is altering a liquidity facility it provides to banks to allow them to hold a greater proportion of high quality liquid assets, though they would have to pay more as a result.

The RBA has a committed liquidity facility (CLF) for institutions that provides them with funding in times of market stress.

It was set up in 2015 as part of the Basel III liquidity reforms for the global financial system.

The RBA said on Friday financial institutions using the CLF would now be able to increase their holdings of high quality liquid assets from 25 per cent to 30 per cent of the stock of HQLA securities.

The change would occur at a pace of one percentage point per year until 2024, starting with an increase to 26 per cent in 2020.

The RBA will also raise the fee for using the facility to 20 basis points per annum, from the current 15 basis points.

The fee will rise to 17 basis points on January 1, 2020 and to 20 basis points on January 1, 2021.

AAP

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