"The design of the CLF is very much in keeping with the Reserve Bank's (and other central banks') provision of liquidity to the financial system"
- Assistant Governor of Reserve Bank of Australia, Guy Debelle
The Reserve Bank of Australia said on Friday they are planning to introduce a $300 billion committed liquidity facility in January 2015 in order to help domestic banks to comply with new global capital regulations and which is expected not to add any substantial risk through a large expansion of the RBA's balance sheet. The committed liquidity fund of CLF was proposed by the Australian Prudential Regulation Authority and the Reserve Bank of Australia three years ago, as banks were struggling to meet an expected shortfall in their holdings of government bonds. The programme was approved by the RBA in November 2010. To make payments of a fee the liquidity fund will commit the RBA to acquire eligible securities from authorized deposit-taking institutions also known as ADIs. Currently, ADIs owns about $130 billion of previously mentioned securities.
Assistant Governor of Reserve Bank of Australia, Guy Debelle also stressed out that during the global financial crisis, when several sectors of financial markets became impaired to varying degrees, the central bank should modify several aspects of its operating framework. Finally, Australian policymakers are expecting some significant developments in RBA's balance sheet, resulting from some changes in the nation's payment system and introduction of the committed liquidity facility.
© Dukascopy Bank SA