Term Funding Facility Notifications

This page is where the Reserve Bank publishes amendments to the TFF Operational Notes, and the dates upon which they come into effect.

Notice – 1 September 2020

The following amendments have been made to the TFF Operational Notes.

  • New text was added to a paragraph in Section 1, which now reads:

    The Term Funding Facility to Support Lending to Australian Businesses (TFF) was announced on 19 March 2020 as part of a package of measures to support the Australian economy. The TFF was varied on 1 September 2020 to provide further support (see Market Announcement). Under the TFF, the Reserve Bank will offer three-year funding to authorised deposit-taking institutions (ADIs) through repurchase transactions at a fixed pricing rate of 25 basis points per annum.

  • New text was added to a paragraph in Section 4.2, which now reads:

    When Eligible Securities are purchased by the Reserve Bank under a TFF Repo, the Reserve Bank will apply a margin ratio in order to obtain the ‘purchase price’ for the securities (see Margin Ratios for more details). The margin ratios applicable to TFF Repos are the same as applied to other repos conducted with the Reserve Bank as part of its domestic market operations.

  • New text was added and existing text was amended in a paragraph in Section 5, which now reads:

    Participants in the TFF may access funding up to their Funding Allowance. To 30 September 2020, the Funding Allowance for each participant is equal to an Initial Allowance plus an Additional Allowance. From 1 October 2020 to 30 June 2021, the Funding Allowance is equal to the sum of any existing drawdowns against the Initial Allowance; a Supplementary Allowance; and an Additional Allowance.

  • Some text was removed in a paragraph in Section 5.2, which now reads:

    The Reserve Bank will update the ADI's Additional Allowance on an ongoing basis as new data on outstanding business credit are submitted by the ADI. The Reserve Bank may adjust Additional Allowances to account for reclassifications between lending types. Following each data submission, the value of the Additional Allowance may increase or decrease depending on the change in the stock of Large Business and SME Credit Outstanding. The TFF Worked Examples illustrate the quantity of borrowing available in various scenarios.

  • Some text was amended in a paragraph in Section 5.2, which now reads:

    For ADIs in Group A, the Additional Allowance is available for drawdown beginning on 6 April 2020. For ADIs in groups B and C, the Additional Allowance will become available following receipt and verification of the required data by the Reserve Bank, and no earlier than 6 April 2020. For all groups the Additional Allowance will be available for drawdown until 30 June 2021. To sustain access to the Additional Allowance until this time, ADIs in groups B and C must continue reporting the new data on outstanding business credit. Failure to continue reporting might result in early termination of existing TFF Repos.

  • A new section, 5.3, was added:

    5.3 Supplementary Allowance

    The Supplementary Allowance is set at 2 per cent of a participant's Total Credit Outstanding to Australian resident households and (non-related) businesses; credit extended to non-residents is excluded. This calculation is made using data available to the Reserve Bank from existing ADI reports to APRA, as summarised in the below table:

    Group

    Total Credit Outstanding is defined as:

    APRA reporting item

    Calculation

    Collection

    A ARF_720_1A/B BSAO27554(a) Average of three months ending 31 July 2020 Existing
    B ARF_720_1A/B BSAO27554(a) Average of three months ending 31 July 2020 Existing
    C ARF_323_0 BSAO11182(b) Quarter ending 30 June 2020 Existing

    (a) See APRA PET (A or B) and Form Standard
    (b) See APRA PET and Form Standard

    The Supplementary Allowance is available for drawdown beginning on 1 October 2020. In order to access the Supplementary Allowance on 1 October 2020, ADIs must submit a TFF Repo Request by 12.00pm AEDT on Monday 28 September 2020. ADIs will be able to draw on their Supplementary Allowance from that date through to 30 June 2021.

  • Consistent with the addition of Section 5.3, what was previously Section 5.3 is now Section 5.4, and what was previously Section 5.4 is now Section 5.5
  • New text was added to a paragraph in Section 5.4 (following the new numbering outlined above), which now reads:

    There may be a period during which merging ADIs' access to new funding under the TFF is temporarily placed on hold until the Reserve Bank is able to confirm the merger details. Once those details are confirmed, the continuing ADI will regain access to the TFF to make further drawdowns of its existing Funding Allowance. The Reserve Bank will also notify the continuing ADI of a revised Funding Allowance and when it will become available; the continuing ADI will not receive an Additional Allowance for assets that are transferred (except as contemplated below). Merging ADIs will be required to enter a joint agreement with the Reserve Bank if the discontinuing ADI has drawn or intends to draw on the TFF before the merger date. Until this agreement is in place, the discontinuing ADIs' access to the TFF will be temporarily on hold.

  • Text was amended in another paragraph in Section 5.4 (following the new numbering outlined above), which now reads:

    If the loan assets used in calculating the Funding Allowance of the discontinuing ADI are being fully transferred to the continuing ADI, the Funding Allowance of the continuing ADI will be from the Funding Allowance of the continuing and the discontinued ADI.

  • New text was added to Section 6.2, which reads:

    On 1 September, as part of the ongoing notification letters sent to each eligible counterparty, the Reserve Bank notified the value available to them under their Supplementary Allowance from 1 October 2020.

  • New text was added to a paragraph in Section 7.3, which now reads:

    All TFF drawings will be applied against the Initial Allowance until it is fully drawn or until the Initial Allowance drawdown window closes on 30 September 2020, whichever comes first. All subsequent TFF drawings will be applied against the Supplementary and Additional Allowances.

  • Text was amended and new text was added to a paragraph in Section 7.7, which now reads:

    In the event that an ADI's Funding Allowance declines below the amount that the ADI has drawn under the TFF, the Reserve Bank will require the ADI to reduce the amount of funding they have drawn to (or below) the Funding Allowance. To do so, the Reserve Bank will inform the ADI in its Additional Allowance notification, and set out the process for the ADI to reduce the amount of their drawn TFF funding to no greater than their Funding Allowance.

  • Text was amended in Section 8, which now reads:

    The Reserve Bank publishes data on aggregate usage of the TFF on a weekly basis, and aggregate allowances on a monthly basis. The Reserve Bank will not publish institution-level data, but there are no restrictions on ADIs publishing data on their own usage of the TFF.

Notice – 25 May 2020

New text has been added to section 5.2 of the TFF Operational Notes to clarify issues relating to Funding Allowances:

  • The Reserve Bank may adjust Additional Allowances to account for reclassifications between lending types.

Notice – 21 April 2020

The following amendments have been made to the TFF Operational Notes to clarify issues relating to Funding Allowances:

  • Worked examples that illustrate the quantity of borrowing available in various scenarios were added (see TFF Worked Examples).
  • New text was added to section 5.2:
    To sustain access to the Additional Allowance until this time [31 March 2021], ADIs in groups B and C must continue reporting the new data on outstanding business credit. Failure to continue reporting might result in early termination of existing TFF Repos.
  • A new section on Mergers and consolidations has been added:

    5.3 Mergers and Consolidations

    Under the RITS Regulations, ADIs are required to provide the RBA with prior written notice of any merger or consolidation: see clause 30.1(d). In addition, ADIs that intend to enter into a merger or consolidation in the period when the TFF is operational (and that have accessed or wish to access the TFF) should also provide prior written notice to the Reserve Bank by email to RBATFF@rba.gov.au and provide any information required by the Reserve Bank in respect of the merger of consolidation. In the case of a merger, this may include (to the extent relevant to the proposed merger):

    • the names of the continuing and discontinuing ADIs and expected merger date;
    • details on the share of the loans that were previously associated with the discontinuing ADI that will be transferred to the continuing ADI, and the expected date of transfer;
    • whether there will be any asset sales by the discontinuing ADI to a third party outside of the merging ADIs, and the expected date of sale; and
    • prompt notice of any likely restatements to relevant data previously reported to the Reserve Bank or APRA as a result of the merger.

    There may be a period during which merging ADIs' access to new funding under the TFF is temporarily placed on hold until the Reserve Bank is able to confirm the merger details. Once those details are confirmed, the continuing ADI will regain access to the TFF to make further drawdowns of its existing Funding Allowance. The Reserve Bank will also notify the continuing ADI of a revised Funding Allowance and when it will become available; the continuing ADI will not receive an Additional Allowance for assets that are transferred. Merging ADIs will be required to enter a joint agreement with the Reserve Bank if the discontinuing ADI has drawn or intends to draw on the TFF before the merger date. Until this agreement is in place, the discontinuing ADIs' access to the TFF will be temporarily on hold.

    If the loan assets used in calculating the Funding Allowance of the discontinuing ADI are being fully transferred to the continuing ADI, the Funding Allowance of the continuing ADI will be the sum of the Initial and Additional Allowances of the continuing and the discontinued ADI.

    If the loan assets used in calculating the Funding Allowance of the discontinuing ADI are only partially transferred to the continuing ADI, the continuing ADI will not receive the full Funding Allowance of the discontinuing ADI.

    From the merger date, the Additional Allowance of the continuing ADI will be equal to the sum of the Additional Allowances of the merging ADIs. The Additional Allowance of each merging ADI will be calculated separately. The Reserve Bank will do this by allocating changes in outstanding business credit for the merged ADI on a pro-rata basis to the stock of outstanding business credit of each of the merging ADIs from the merger date. The continuing ADI is required to report business credit data on a consolidated basis across the merging entities and is not required to report these data separately for the discontinuing ADI.

Notice – 14 April 2020

The following amendments have been made to the TFF Operational Notes to clarify certain aspects of the execution and settlement of TFF repos:

  • A new section on Transaction Size and Rounding has been added:

    7.4 Transaction Size and Rounding

    The Reserve Bank will adjust transactions sizes to ensure that new transactions do not cause an ADI to exceed its Funding Allowance. If an ADI submits a TFF Repo Request with a requested transaction size (i.e. repo ‘Purchase Price’) greater than their unused Funding Allowance, then the Reserve Bank will notify the ADI and set the Purchase Price equal to the unused Funding Allowance when completing the trade.

    The final cash amount delivered will always be equal to or slightly lower than the requested transaction size, reflecting the minimum parcel size of the securities sold.

  • A new section on Settlement Procedures has been added:

    7.5 Settlement Procedures

    Settlement of TFF Repos takes place within the Austraclear system (see Settlement Procedures for more details). Each leg of the repo will be settled as an outright transaction. A manual trade confirmation will be provided by email to confirm that the trade has been conducted as a repo.

Notice – 6 April 2020

An alternative method of calculating the Additional Allowances for the Term Funding Facility (TFF) has been introduced. The adoption of two methods ensures that all increases in lending to small and medium enterprises (SMEs) since February 2020 will count towards the Additional Allowance. This change will ensure that all Authorised Deposit Taking Institutions (ADIs) face strong incentives to extend credit to SMEs during this difficult period.

The contribution of SME Credit Outstanding to the Additional Allowance will now be calculated as the greater of:

  • First method: five times the dollar increase in SME Credit Outstanding from the three months ending 31 January 2020 through to the three months ending 31 January 2021 (if there is a decline in SME Credit Outstanding, then this is zero); or
  • Second method: five times the dollar increase in SME Credit Outstanding on 29 February 2020 through to the three months ending 31 January 2021 (if there is a decline in SME Credit Outstanding, then this is zero).

There is no change to the calculation of the Initial Allowance or the contribution of Large Business Credit Outstanding to the Additional allowance. Furthermore, the alternative approach does not affect any ADI's current Additional Allowances.

The Operational Notes have been adjusted to reflect this change.