New APRA liquidity rules
APRA has announced that it is looking to introduce prescribed liquidity requirements for Aussie Banks. Its early days, but it appears the proposal is that banks would be allowed to count only government and semi-government bonds as liquid assets.
Effectively, Banks will have restraints on other bank paper or bank bills in their liquid assets – funds lent between banks. APRA have concerns that these funds are correlated in the event of a banking crisis. There is concern on the impact this will have on the bank bill swap rate.
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Do you think this is a device to get more/cheaper funds for the public sector? Risk management and liquidity management wise it seems a rather stupid policy — I am sure top quality short term debt securities that have an active secondary market will remain a good source of liquidity even during crisis situations.