Guy Debelle. Photo: Michel O'Sullivan
The Reserve Bank has defended a $300 billion liquidity facility set up to help Australian banks meet tough new international rules put in place after the financial crisis.
RBA assistant governor Guy Debelle said the committed liquidity facility (CLF), operating from January 2015 after the Basel 3 rules kick in in Australia, would not help banks avoid the stringent new liquidity standards or blow out the central bank's balance sheet.
Basel 3 requirements, set up after the financial crisis, require banks to hold enough high-quality liquid assets - such as government bonds and semi-government securities - to withstand 30 days of stress.
The low level of Australian government debt has meant banks only own about $130 billion of these securities - about $300 billion short of what they would need to meet the Basel standards, Mr Debelle said at a speech to the Australian Financial Markets Association in Sydney on Friday.
The new facility would help banks meet the liquid assets requirements by allowing them to use as collateral other assets beyond government bonds when borrowing from the Reserve Bank. A fee of 15 basis points would be charged.
''The design of the CLF … should not result in any material change in the size of the bank's balance sheet and has been structured to avoid a significant increase in the balance sheet that would have risked the effective functioning of domestic markets,'' Mr Debelle said.
He said 15 basis points fee was an ''appropriate price for a liquidity option [banks] have always implicitly held''.
Critics had said that the facility made liquid assets too easily available to the banks.