Eligible Securities

Securities must meet certain criteria to be eligible for use in the Reserve Bank's domestic market operations. The Reserve Bank has the discretion to change its eligibility criteria at any time.

1. How to Apply

Applicants must submit all supporting documents, outlined in the application form, before the Reserve Bank will begin reviewing the application.

Australian Government (AGS) and semi-government securities are automatically eligible. Short-term paper (less than 12 months to maturity) is assessed at the issuer level. All other securities are assessed individually.

Any queries should be addressed to eligible_securities@rba.gov.au.

2. Eligibility Criteria

All criteria must be met on application, and for the term of each transaction. The Reserve Bank can revoke eligibility at any time; where a security posted under repo has its eligibility revoked, the counterparty will be expected to substitute alternative eligible collateral.

Table 1 lists securities that are eligible for transactions in the Reserve Bank's domestic market operations and various facilities. The Reserve Bank only accepts certain securities for some transactions.

2.1 Primary criteria

These criteria apply to all securities. Some security types have additional criteria (section 2.2).

1. Denominated in Australian dollars
2. Lodged and active in Austraclear

   All transactions in domestic market operations are settled in Austraclear.

   The Reserve Bank will not begin assessing securities until they have been issued and are active in Austraclear.

3. Governed by the laws of an Australian state or territory
4. Not a euro entitlement

   The Reserve Bank only accepts securities that are issued directly into Austraclear, as indicated by a ‘domestic’ syndication in Austraclear.

   A euro entitlement exists where an Australian dollar denominated security has been deposited with an international central securities depository (such as Euroclear or Clearstream) as an ‘Investor CSD’ but where Austraclear permits that security to settle through its system as an ‘Issuing CSD’ in the same manner as domestic securities.

5. Senior and unsubordinated

   Eligible securities must not be subordinated to any other unsecured debt securities. However, subordinated tranches of asset-backed securities are eligible if they meet all other criteria.

   Subordination includes:

   • Structural subordination, where debt securities issued by a holding company are subordinated to debt securities issued by its subsidiary. Structurally subordinated securities are ineligible regardless of supporting guarantees from subsidiary issuers.
   • Statutory subordination, where debt is legislated to be subordinated. For example, long-term (i.e. original maturity greater than 400 days) senior unsecured debt issued by Canadian banks after 23 September 2018 is subordinated to short-term senior unsecured debt, as well as long-term senior unsecured debt issued before this date.

   Securities that can be bailed in under a foreign jurisdiction's statutory powers can still be eligible. This includes securities that count towards Total Loss Absorbing Capacity (TLAC) or Minimum Requirement for own funds and Eligible Liabilities (MREL). However, a security is not eligible if it would be bailed in before other unsecured debt securities issued by the same institution. For example, senior non-preferred securities are not eligible.

6. Minimum credit rating

   Table 2: Minimum Average Rating Requirement

   Standard & Poor's equivalent rating

   	Minimum number of ratings	Minimum average rating
   Australian Government and semi-government securities	None	N/A
   New Zealand Government securities	None	N/A
   Australian and New Zealand Government-guaranteed securities	None	N/A
   ADI bonds	2	BBB−
   ADI paper	1	Public
   Corporate bonds	1	BBB
   	2	BBB−
   Commercial paper	1	BBB/A−3
   	2	BBB−
   Asset-backed securities	1	AAA
   Self-securitisations	1	AAA
   Supranational and foreign-government securities	1	AAA
   Other AAA	1	AAA
   Asset-backed commercial paper	1	AAA/A−1

   Ratings must be final, publicly available and from a recognised credit agency (Standard & Poor's, Moody's or Fitch).

   If both the security and issuer are rated by the same recognised credit agency, the Reserve Bank uses the lower of the two, except for:

   • covered bonds, where the security rating is used if available.
   • asset-backed securities and asset-backed commercial paper, where only security ratings are considered.

   If any tranche of an asset-backed security or asset-backed commercial paper program issued after 1 April 2019 is rated by more than one agency, only tranches rated by the same agencies will be considered for repo eligibility.

   Average ratings are calculated by assigning an ordinal ranking (AAA = 1, AA+ = 2, etc.) and taking the average, rounding to the nearest integer (with 0.5 rounding to the lower credit rating).

   A credit rating on negative watch is treated as an immediate one notch downgrade. A negative outlook has no effect.

   Recognised Credit Rating Agencies

   The Reserve Bank will consider requests for additional credit agencies to be recognised. An entity must first be recognised by APRA as an External Credit Assessment Institution before the Reserve Bank will consider a request. Requests should be submitted to eligible_securities@rba.gov.au.

7. Freely tradeable in the secondary market

   Private placement securities can be eligible as long as they are freely tradeable. Trading restrictions that are not allowed include a requirement that a noteholder gains the consent of another party in order to be able to sell the security.

8. Contains a robust, reasonable and fair fallback rate, if the security references BBSW

   All floating rate notes (FRNs) and marketed asset-backed securities issued on or after 1 December 2022, where BBSW is the relevant interest rate for the purposes of calculating coupons, must meet the following criteria in order to be eligible for purchase by the Reserve Bank under repo:

   • Include at least one ‘robust’ and ‘reasonable and fair’ fallback for BBSW in the event that it permanently ceases to exist.
   • A ‘robust’ fallback is one that clearly specifies the method for the calculation of interest that would apply for the purposes of calculating coupon payments. The fallback must also specify a clear and unambiguous trigger event after which the fallback would apply. Acceptable fallbacks would include those that reference AONIA (including AONIA plus or minus a fixed spread). Fallbacks that reference another benchmark interest rate may also be accepted at the Reserve Bank's discretion. A fallback waterfall may additionally include a fallback to a reference rate that might exist in the future, for example forward-looking term AONIA, subject to it being declared a significant financial benchmark by ASIC at the time the fallback is triggered.
   • A ‘reasonable and fair’ fallback is one that reasonably mitigates the impact on the economic value of the security in the event the fallback is invoked. A fixed-rate fallback would not be considered reasonable and fair for the purposes of these criteria.
   • The robust and reasonable and fair fallback(s) must sit above any other fallbacks that rely on collecting dealer quotes, or on discretion – whether by the issuer, the calculation agent, or any other related or third party – in the fallback waterfall.
   • Include a fallback to apply in the case that BBSW is not available, but where it has not permanently ceased. This fallback must: clearly specify the method for determining the interest that would apply for the purposes of calculating coupon payments; and specify a clear and unambiguous trigger event after which the fallback would apply. An example of an acceptable fallback structure is that provided for the ‘No Index Cessation Effective Date with respect to BBSW’ circumstance in the 2020 ISDA IBOR Fallbacks Supplement. A fallback relying on collecting dealer quotes, or on discretion by the issuer, the calculation agent, or any other party related to the security must not sit at the top of the fallback waterfall.

   All self-securitisations, regardless of the date of issue, will also be required to include at least one robust and reasonable and fair fallback in order to be eligible. The Reserve Bank will engage with self-securitisation issuers and give at least 12 months' notice before enforcing this requirement.

   The following securities are excluded from this requirement for eligibility:

   • FRNs and marketed asset-backed securities issued before 1 December 2022.
   • Tap issuances on or after 1 December 2022 of FRNs and marketed asset-backed securities (ABS) first issued before 1 December 2022.
   • Issuances of ‘refinancing notes’ on or after 1 December 2022, whose proceeds are used to repay existing notes first issued before 1 December 2022 from marketed closed-pool ABS trusts.

   Nevertheless, the inclusion of robust and reasonable and fair fallbacks for securities that are excluded from this requirement is strongly recommended as a matter of prudent risk management (particularly for those securities with a greater length of time to their maturity).

9. Issuer is not domiciled in a tax haven or in a jurisdiction that entails legal risk outside the Reserve Bank's risk appetite
10. Not highly structured

    Securities must not contain structural features that present risks to the Reserve Bank that are complicated or difficult to quantify.

11. Not materially related to the counterparty

    The Reserve Bank considers entities in the same corporate group, or where one entity owns more than 15 per cent of another, to be materially related. The Reserve Bank also considers self-securitised asset-backed securities to be materially related to the ADI whose receivables have been securitised. Counterparties that are materially related to an eligible security will appear on the List of eligible securities.

    The Reserve Bank may grant a related-party exemption for self-securitisations to allow a counterparty to post a materially related security for repos contracted under Exceptional Liquidity Assistance and the Term Funding Facility, but not for open market operations or Standing Facilities (see Section 3).

12. Has not entered the closed period to maturity, and no call or redemption notice has been issued

2.2 Additional criteria

The following criteria apply to certain securities:

13. Government-guaranteed securities
    1. Explicit guarantee defined in legislation

       Issuers that meet this requirement include the Export Finance Australia, the National Housing Finance and Investment Corporation (NHFIC), and KFW.

14. Commercial paper
    1. Issued by an Australian company, or an issuer established by Australian legislation

       See the List of Eligible Securities for issuers that meet this requirement.

15. Asset-backed securities, self-securitisations and asset-backed commercial paper
    1. Cash flows are not generated from synthetic assets underlying the transaction

       The Reserve Bank does not accept asset-backed securities where the primary assets are derivatives.

    2. Based on a true sale of assets into a bankruptcy-remote special purpose vehicle
    3. Not particularly complex or unusual

       The Bank assesses the structure of the special purpose vehicle, the underlying assets and structure of the liabilities, as well as any related parties and support features.

    4. Makes regular coupon payments, if the maturity is greater than 12 months
    5. Report data to the Securitisation System each month

       Securitisation submissions are due on the monthly anniversary of the distribution date. For more information see the RBA Securitisations Industry Forum.

       Securities will cease to be eligible if they do not report on time. Securities will remain ineligible for at least one month, until all outstanding submissions and the next month's submission have been made.

       Information Providers can contact the Securitisation Support Centre before the deadline to request an extension. These requests will only be granted under exceptional circumstances.

    6. If the pool is revolving, provide a ratings affirmation and an insurability attestation letter (if applicable) at least annually, or on request.
       See Asset-backed Securities Maintenance for more information. Complete the ABS Maintenance Form to submit documents.
    7. Submit completed ABS Maintenance Forms, that meet the RBA’s minimum notice periods, in advance of a:
       • Legal document change – transaction documents are amended. The minimum notice period is 20 business days for legal document changes.
       • Large balance change – more than 10% of pool assets change, including uplifts, downsizes and substitutions. The minimum notice period is 10 business days for large balance changes that do not involve legal document changes.
       • ISIN change – new ISIN is issued from the trust which must be repo eligible from the issue date. The minimum notice period is 10 business days for ISIN changes that do not involve legal document changes.
       See Asset-backed Securities Maintenance for application requirements. To apply, complete the ABS Maintenance Form.

3. Related-party Exemptions for Self-securitisations

The Reserve Bank may grant a related-party exemption to a counterparty for a self-securitisation which the Reserve Bank considers to be materially related to that counterparty. This exempts the security from criteria 11; the Reserve Bank would purchase the security from the counterparty in repos contracted under Exceptional Liquidity Assistance and the Term Funding Facility, but not in open market operations or under the Reserve Bank’s Standing Facilities.

• Exceptional Liquidity Assistance. Related-party exemptions will be considered on a case-by-case basis (Liquidity Facilities Operational Notes, section 4)
• Term Funding Facility. Related-party exemptions are automatically granted (Term Funding Facility Operational Notes, section 4.1).