Projected allocations under the Committed Liquidity Facility - a security blanket for 14 banks - will fall to A$223 billion in 2017, the Australian Prudential Regulation Authority said on Friday.This will be the second year in a row demand by banks for a CLF has narrowed, APRA said.In 2015 the Reserve Bank of Australia, in consultation with APRA, set the CLF at A$275 billion.In 2016 the RBA set the aggregate facility at $245 billion. The CLF covered 13 banks that year.The expected decline in the CLF in 2017 more or less correlates with an estimate shared by now RBA deputy governor Guy Debelle in June that domestic banks could reasonably hold $220 billion in government bonds without impairing the market, which would be an increase of $25 billion compared to the holdings in 2016.Banks pay a fee of 15 basis points each year on the amount committed, so the reduced demand produces marginal sector-wide savings.The decreases "have been primarily driven by the increased availability of Australian government securities and semi-government securities," APRA said in a letter to ADIs posted at its website.The CLF is a backstop loan from the central bank intended to mitigate past shortfalls in government securities available to local banks, a function of the reduced funding requirements of the national government in the pre GFC era.ADIs, APRA reminded banks in the letter, "are required to demonstrate that they have taken 'all reasonable steps' towards meeting their liquidity coverage ratio requirements through their own balance sheet management before applying for a CLF."