Australia cbank sees bank liquidity facility of around A$300 bln
SYDNEY Aug 16 (Reuters) - Australia's central bank expects a new liquidity facility that will allow the country's banks to meet tougher global capital adequacy standards should amount to around A$300 billion ($275 billion), a top official said on Friday.
Reserve Bank of Australia (RBA) Assistant Governor Guy Debelle emphasised the facility would not materially impact on the central bank's balance sheet, though coming changes in the country's electronics payments system would lead to some increase in the balance sheet.
The committed liquidity facility (CLF) is designed to allow local banks to meet Basel III rules that require financial institutions to hold high-quality liquid assets as a buffer during times of market stress.
In Australia, there are simply not enough high-quality assets, mainly government bonds, for banks to meet the new rules. The CLF, which starts in January 2015, will allow banks to obtain guarantee of liquidity from the RBA for a set fee, and thus meet the new rules.
Debelle said banks currently owned around A$130 billion of government debt, both federal and state.
"A rough estimate would be that this is as much as $300 billion short of where they would need to be to meet the Basel standard, given their current balance sheet structures," said Debelle, who heads the RBA's financial markets unit.
The RBA will charge a flat fee of 15 basis points to establish a CLF, which will allow banks to use a much wider range of assets as collateral when borrowing from the central bank. The RBA will also discount any security used as collateral by as much as 25 percent.
Debelle also noted that coming changes to the process for settling electronic 'direct entry' (DE) payments would result in an expansion of the RBA's balance sheet.
Currently such payments are settled on the next business day but from November they will be settled on the same day.
This means that banks will likely have to hold much larger reserves at the RBA in order to meet payments that are settled late in the day after money markets close.
Debelle expects exchange settlement balances, used to meet such payments, will increase to between A$20 and A$30 billion from the current average of around A$1 billion.
The central bank also expects it may often have to carry out more than one set of open market operations per day in order to meet banks' requirements for funds under the new system. (Reporting by Wayne Cole; Editing by John Mair)
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