RBA unveils bank liquidity facility for Basel III
- From: Dow Jones Newswires
- December 17, 2010
The RBA and APRA will offer banks a secured liquidity facility to help them comply with the new Basel III requirements / File
THE RBA and APRA will offer Australia's banks a secured liquidity facility to help them comply with the new Basel III requirements.
The agreement from the Reserve Bank of Australia and the Australian Prudential Regulation Authority comes less than a day after the Bank for International Settlements said banks would have faced a total capital shortfall of roughly $US762.85 billion if so-called Basel III rules, which international negotiators agreed to this fall, had kicked in last year, The Australian reports.
Basel III will take effect gradually over the next eight years.
These planned rules to hold more liquid assets in the form of sovereign debt have been a major cause of concern in Australia, given the relative scarcity of government bonds.
The Basel Committee mapped out a "level two" category to allow other forms of debt to be included as a liquid asset, opening up the possible option of bank bonds or other debt instruments to be considered in Australia, although investors locally were still concerned that wouldn't be enough to meet the new requirements.
Under the new RBA and APRA approach announced today, an authorised deposit-taking institution, or bank, can establish a committed secured liquidity facility with the RBA, sufficient in size to cover any shortfall between the firm's holdings of high-quality liquid assets and a liquidity cover ratio requirement.
