Bank CEOs today will parade before the cameras at a meeting with regulators and declare they will do as they are asked, or cajoled, or told - and keep the lending taps open.
Or they will if they want access to A$90 billion of term funding from the Reserve Bank. For now the industry will be eager, but cynical.
Big bank CEOs more than likely will then head back to work and throttle down business credit.
This is the same as in every severe downturn and above all banks, chiefs and boards are confined by:
- their duty to shareholder value;
- and conformity with a raft of APRA prudential standards demands.
For now, the realities of managing risk and reputation at the big banks is that they are cornered by blowback from the Hayne royal commission.
The scheme "has two broad objectives," Philip Lowe, the RBA governor, said yesterday.
"The first is to lower funding costs for the entire banking system so that the cost of credit to households and businesses is low. In this regard, it will complement the target for the three-year yield on bonds.
"The second objective is to provide an incentive for lenders to support credit to businesses, especially small and medium-sized businesses.
This is a priority area for us. Many small businesses are going to find the coming months very difficult as their sales dry up and they support their staff."
Under this facility, banks in total will have access to "at least $90 billion in funding".
- ADIs will be able to borrow from the Reserve Bank an amount equivalent to 3 per cent of their existing outstanding credit to Australian businesses and households. ADIs will be able to draw on these funds up until the end of September this year, the close of the financial year for most big banks.
- Lenders "will also be able to borrow additional funds from the Reserve Bank if they increase credit to business this year," Lowe said.
- For every extra dollar lent to large business, lenders will have access to an additional dollar of funding from the Reserve Bank.
- For every extra dollar of loans to small and medium-sized businesses they will have access to an additional five dollars.
- These funds can be drawn upon up until the end of March next year. There is no extra borrowing allowance for additional housing loans.
- The TFF will provide funding to ADIs at an interest rate of 25 basis points, fixed for the three-year term of the funding.
The first drawings under this facility will be possible no later than four weeks from today, though the demand may be acute at present.
The RBA yesterday conducted "its largest repo operation ever, supplying the market with $12.7 billion in funding.