Term Repo Operations

The RBA Monetary Policy Board has endorsed the establishment of Term Repo Operations (TROs) to complement the RBA’s existing facilities and formalise and systematise the Bank’s long-standing approach to support monetary policy implementation and financial stability. This information statement outlines the purpose and design of TROs, and guidance for financial institutions. The RBA expects to launch TROs in 2027; further legal and operational details will be published well in advance of that launch.

Purpose of TROs

TROs will offer term liquidity to eligible financial institutions at 3 or 6 months maturity through regular auctions. TROs are being established following changes to the RBA’s liquidity operations in recent years, including the introduction of full-allotment open market operations (OMOs), which provide ready access to short-term liquidity at 7 and 28 days maturity. TROs will provide longer term liquidity, complementing OMOs in meeting financial institutions’ demand for reserves, and continuing the RBA’s long-standing approach of providing liquidity over various terms. Many peer central banks have similar operations.

Design

TROs will be available at a modest scale on a regular basis; depending on market conditions, the timing and scale of the auctions could be adjusted if needed. TROs have been designed to be:

• offered through fixed-size variable-price competitive auctions, in contrast to the full allotment approach of OMOs
• conducted normally on a weekly basis, but more frequently if needed; and
• collateralised against a broad range of eligible securities, including self-securitisations.

The core design parameters for TROs are outlined in the table below.

The RBA expects that the quantity of liquidity offered at TROs will be typically modest relative to OMOs and the size of private funding markets. The RBA may adjust the design of TROs as appropriate, such as increasing the size and frequency of auctions, including where it judges that:

• there is actual or prospective liquidity stress that is market-wide; and
• the stress poses material risks to the stability of Australia’s financial system or the implementation of monetary policy; and
• adjusting TROs is well-suited to addressing the risks and other tools such as OMO are inappropriate or unlikely to be sufficient.

Adjustments to the scale, frequency and other design parameters of TROs would be informed by market conditions. The TROs will complement the range of other liquidity tools the RBA also has in place.¹

Guidance for banks using TROs

The RBA and APRA consider the use of TROs to be consistent with sound liquidity management and will be comfortable with banks using the operation. The RBA and APRA will liaise with banks to ensure they understand the role of TROs and are ready to use them.