In return for providing commitments under the CLF, the
RBA will charge an annual fee of 0.15% per annum, based on the size
of the commitment.
In December last year the Reserve Bank of Australia announced
that it would make a committed liquidity facility
(CLF) available to authorised deposit-taking
institutions so that they could meet any shortfalls in their
ability to satisfy the Liquidity Coverage Ratio
(LCR) under Basel III.
On Wednesday 16 November 2011, the RBA provided additional
details on the CLF. The RBA announced that in return for providing
commitments under the CLF, it will charge an annual fee of 0.15%
per annum, based on the size of the commitment.
Accessing the CLF and eligible securities
In its announcement, APRA emphasised the importance of the CFL
in light of the fact that it will only allow cash and government
securities to count as liquid assets for the purposes of the LCR.
The CLF will play a key role in facilitating coverage by ADIs of
any shortfalls between their liquid assets and the LCR
Securities that ADIs can use as collateral under the CLF will
include all securities eligible for repoing under the RBA's
normal market operations. The RBA has also stated that
self-securitised RMBS will be eligible collateral under the CLF.
Should an ADI lack a sufficient quantity of residential mortgages,
the RBA has indicated that it will consider other
"self-securitised" assets on a case-by-case basis.
Before an ADI can rely on the CLF it must first receive approval
from APRA, which may require as much as 12 months' advance
The annual fee and initial margins
The 0.15% per annum access fee for the CLF will apply to both
drawn and undrawn commitments and must be paid monthly in advance.
It may also be varied by the RBA at its sole discretion, provided
that the RBA gives three months' notice of any change.
The RBA has also stated that the initial margins applied to
eligible collateral will be the same as those used in its normal
market operations. Consistent with current practice, each day the
RBA will revalue all securities held under the CLF at prevailing
market prices. Furthermore, in line with its overnight repo
facility arrangements, the interest rate for the CLF will be set at
0.25% above the RBA's target cash rate.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
Persons listed may not be admitted in all states and
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