Smaller banks will be able to continue to recognise their holdings of the debt of other banks for liquidity purposes, aat least for a time.
Yesterday APRA released a response to submissions on their targeted reforms to bank liquidity and capital requirements which they announced in November.
Following the consideration of industry feedback to APRA's consultation letter, APRA will:
• Defer policy changes to APS 210 regarding the composition of liquid assets to APRA's planned broader review of liquidity risk due to commence next year. This is to allow a more holistic review of the MLH regime. APRA will undertake supervisory actions with ADIs with material concentrations of bank debt securities as liquid assets.
• Proceed with the proposed policy changes on market valuations for liquid assets from 1 July 2025.
• Proceed with the proposed improved processes for exceptional liquidity assistance (ELA) from 1 July 2025.
For those smaller banks subject to the Minimum Liquidity Holdings regime, APRA shared advice and a warning.
"APRA envisages that MLH ADI boards will determine a suitable glidepath tailored for their ADI and take into account their ADI's individual circumstances.