Australian regulator allows $25 billion reduction in banks' committed liquidity facility

(Reuters) – Australia’s banking regulator lowered on Friday the amount of reserves banks are required to hold under the central bank’s committed liquidity facility, due to the increasing amount of government bonds being issued that are bought by banks.

The Australian Prudential Regulatory Authority (APRA) in a statement said it would allow a A$35 billion ($25.43 billion) reduction in the total amount under the facility for major domestic banks, based on the amount they held at the start of 2020.

Liquidity rules require a bank to hold high-quality liquid assets that can withstand a 30-day period of severe liquidity stress, and government bonds are recognised as assets of such quality, but were not available in sufficient quantities so far.

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