Reserve Bank of Australia widens lending facilities

The Reserve Bank of Australia has widened its facilities for lending to banks and other deposit takers to include mortgage backed bonds and asset backed commercial paper issued directly by those banks, rather than through another bank. It has The Reserve Bank of New Zealand has already widened its facilities to include these types of assets. Here is the full Reserve Bank of Australia statement below.

Conditions in global money markets have deteriorated significantly in recent weeks, with flow-on effects to domestic markets. In order to provide authorised deposit-taking institutions (ADIs) greater flexibility to manage their liquidity in these circumstances, the Reserve Bank has decided to make some changes to its domestic market operating procedures. Specifically: The current restriction that prevents an institution from using residential mortgage-backed securities (RMBS) and asset-backed commercial paper (ABCP) of a related party as collateral in its repo operations with the Bank will be relaxed. This also applies to the US dollar term repo facility. The Bank will offer six-month and one-year repos each day in its market operations. Restrictions on substituting collateral within an existing repo, with the exception of general collateral, will be removed. Where the substitution includes a change in the asset class of collateral, the margin applying to that collateral will be adjusted accordingly.