Submission to the Inquiry into the Post-Global Financial Crisis Banking Sector Other Developments

Committed Liquidity Facility

As part of the implementation of the Basel III liquidity reforms in Australia, banking institutions are required to hold sufficient high-quality liquid assets to survive an acute stress scenario lasting one month. Under the new liquidity coverage ratio (LCR) requirement, the Basel standard prescribed that high-quality liquid assets will take the form of government securities. However, in Australia, the supply of government securities is limited. The committed liquidity facility (CLF) is designed to meet the shortfall between Australian banks' holdings of government securities and their liquidity requirements. To secure the Reserve Bank's commitment, banks will be required to pay a market-based fee of 15 basis points per annum against the size of the facility.[16]

Financial Claims Scheme

The Financial Claims Scheme (FCS) is a form of deposit insurance that provides depositors with certainty that they will recover their deposits in a timely fashion in the event that an Australian authorised deposittaking institution fails. The FCS was introduced in 2008, at the height of the global financial crisis. Initially, deposit coverage of up to $1 million per depositor was provided free by the government (with additional coverage available for a fee). Coverage under the FCS was reduced from $1 million to $250,000 per depositor from 1 February 2012. The reduction in the cap has not had any discernable impact on deposit flows and is estimated to cover around 80 per cent of household deposits by value.[17]


For further information on the CLF, see Reserve Bank of Australia (2011), ‘The RBA Committed Liquidity Facility’, Media Release No 2011–25, 16 November and Debelle G (2011), ‘ The Committed Liquidity Facility’, speech at the APRA Basel III Implementation Workshop 2011, 23 November. [16]

See Reserve Bank of Australia (2012), ‘Developments in the Financial System Architecture’, Financial Stability Review, March, p 64 and Turner G (2011), ‘Depositor Protection in Australia’, RBA Bulletin, December, pp 45–55. [17]