Wednesday, March 6, 2013

RBA to Supply Australian Banks a Permanent Bailout Facility

From AFR.com.au

Original source

In a globally unique policy, the Reserve Bank of Australia will supply banks with a permanent bailout facility worth up to $380 billion by 2015.

The policy has been designed by the RBA to help banks satisfy stringent new liquidity tests which simulate “acute stress scenarios” that deny banks funding for 30 days under the post-GFC rules, Basel III.

Local regulators argue that insufficient liquid assets such as government bonds meant they had no choice but to give the banks a new taxpayer-backed “line of credit” that could be tapped at a cost just above the RBA’s cash rate. Smaller building societies and credit unions are not subject to the liquidity tests and will not, therefore, have access to the bail-out fund.

Remarkably few people inside or outside financial markets are familiar with, or understand, this “committed liquidity facility”, which will be managed by the RBA.

Read more

No comments:

Post a Comment