RBA releases TFF operational guide
Large banks and authorised-deposit taking institutions will have immediate access to their funding allocations under the Reserve Bank's new term funding facility but smaller ADIs will have to jump through a few more hoops before they get access to the full allowance.
The RBA yesterday provided more detail about the mechanics of the TFF, releasing a set of operational notes.
It has divided ADIs into three groups for the purpose of setting their funding allowance. Some will only be able to draw down their additional allowance when they have supplied additional data.
Under the TFF scheme, banks will have access to at least A$90 billion in funding at a fixed interest rate of 0.25 per cent for three years. Interest will be due at maturity or when the use of the facility is terminated.
The operational notes cover funding allowances. counterparty eligibility, eligible collateral, margin arrangements and valuations
All ADIs that extend credit are eligible to participate. They must be able to give the RBA eligible collateral and to do this they must satisfy the criteria for counterparty eligibility or the RBA's domestic market operations.
The initial allowance for each ADI will be set at 3 per cent of total credit outstanding to Australian resident households and businesses. There is also provision for an additional allowance, based on large business credit outstandings.
Group A ADIs have business credit outstandings over $2 billion, as of December 2019. There are 35 ADIs in the category.
The 91 Group B ADIs have credit outstandings of over $200 million but business credit outstanding less than or equal to $2 billion.
The 21 Group C ADIs have credit outstandings less than or equal to $200 million.
All participating ADIs will be able to draw on their initial allowance on April 6 through to September 30.
The additional allowance will be set at the sum of: one times the dollar increase in large business credit outstanding over the TFF reporting period; and five times the dollar increase in SME credit outstandings over the TFF window.
If the ADI does not already provide the necessary data to APRA to allow these amounts to be calculated, the ADI must report to the RBA.
Group A ADIs can rely in existing reports and draw down their additional allowance from April 6, but Group B and C ADIs will have to create new reports. Additional allowances will be updated following data submissions.
On other matters, the RBA says counterparties need to be members of the Reserve Bank Information and Transfer System and Austraclear, they need to be subject to an appropriate level of regulation (regulated by APRA hold an AFSL or be a government institution) and they must be able to ensure efficient and timely management of transactions.
To satisfy the eligible collateral requirements, as part of a request to enter into a TFF repurchase arrangement the ADI must nominate eligible securities that it wishes to sell to the RBA under repo.
Eligible securities include supranational, sovereign agency and foreign government Australian dollar securities, bank bills and certificates of deposit, Australian government guaranteed securities, bank bills and certificates of deposit, ADI securities, residential mortgages back securities and other asset-backed securities.
An ADI can submit an application to use securities for TFF repo that meet the requirements but are not on the current list of eligible securities. Self-securitisations are also eligible.
Release of the RBA operational rules follows an APRA statement on Monday saying it would allow authorised deposit-taking institutions taking up the Reserve Bank's term funding facility to include the benefit of their "initial allowance" in the calculation of their liquidity coverage ratio, minimum liquidity holdings ratio and net stable funding ratio from 31 March.
APRA said ADIs would be able to include their TFF allowance in these ratios "to the extent they have the necessary unencumbered collateral to access the facility."