Australia's larger banks presently have on hand 31 per cent of the funds needed to meet projected cash outflow needs in a crisis, the Australian Prudential Regulation Authority estimates.APRA estimates that banks would need to find A$429 billion in a "stressed scenario", and in the regulator's opinion they have access to only $132 billion in liquid assets.The regulator provided the estimates in a paper at the Finsia workshop presented by Charles Littrell, executive general manager for policy at APRA.The estimates arise in the context of modelling one of the new cornerstones of bank management, the "liquidity coverage ratio".From 2015, the LCR will oblige banks to hold sufficient liquid assets to cover a temporary loss of access to funding that falls short of a full-scale run.The lack of liquid assets available to banks under the new standard is partly a function of the banks' past business models, but also stems from the lack of Australian government debt for banks to invest in after the long run of budget surpluses in Australia until 2008.Littrell noted that bank management can solve the problem in three ways."For Australia's banks to meet the [liquidity coverage ratio], they need to greatly reduce their net outflows or greatly increase their qualifying assets, or both increase qualifying assets and reduce net outflows."Littrell said that reducing net outflows "implies that banks reduce the degree to which they provide maturity transformation to the rest of the Australian economy." Or, in other words, they need to curtail their level of lending relative to their funding.Littrell said he expected that banks would "chip away at their net outflows", by growing retail term deposits and by extending the term of longer-dated liabilities, for example.He said APRA also expects some LCR-specific product development, such as 31-day call deposits. Littrell said banks were now offering more attractive term-deposit rates on superannuation investment platforms. He said: "We expect that in the next few years banks will become more adept at sourcing term-funding from super funds."The main mechanism for coping with the shortage of liquid assets will be the committed liquidity facility that the Reserve Bank of Australia will offer for a fee of 15 basis points.APRA intends this facility to be a backstop, and the regulator will patrol banks' funding plans."It is not APRA's intent that the RBA's committed liquidity facility should be the first port of call for banks as they become LCR-compliant," Littrell said."Rather, banks will need to undertake all the steps they reasonably can in private markets, before filling any shortfall with the LCR."He said APRA will "closely supervise bank access to the RBA facility, including the amount each bank can count towards its LCR calculation."In a separate talk, Wayne Byres, the executive general manager responsible for diversified institutions at APRA, said that ADIs must "minimise their call on the RBA". "For example, if an ADI plans to grow its assets with significant reliance on short-term offshore funding, and to rely on the RBA facility to provide the necessary liquidity, I would suspect