In a financial crisis like no other, liquidity is abundant, excessive even.
CUFSS, the mutual ADI backstop, is using the crisis to evolve a broader-based mechanism to bolster small banks shocked by the 2020 pandemic.
Fitch yesterday summed up the state of play for Australia’s biggest banks.
“There is limited funding and liquidity pressure on the banks, given the high system liquidity and support from the central bank.
“The banks reported average liquidity coverage ratios well above the regulatory minimum of 100 per cent, ranging from 151 per cent for Westpac, to 139 per cent at NAB for the September quarter.
“Their net stable funding ratios remained above 120 per cent, against a minimum requirement of 100 per cent.”
At the other end of the banking market, the directors and members of CUFSS Ltd - the Australian Mutual banking industry’s self-funded emergency liquidity support scheme - continue to renovate the scheme.
“The financial impact of reduced subscription revenue due to continued consolidation of the mutual industry will continue to have a material effect on the CUFSS’ business and performance,” the CUFSS directors say in the 2020 annual report, and not for the first time.
“During the course of the year, CUFSS has been working with APRA and the RBA to increase the size of the available funding pool.
“This possible increase in emergency liquidity is via allowing Members with Repurchase Agreements to draw on these and provide emergency liquidity to other Members under the CUFSS umbrella.
“At the date of this Report, discussion is advanced but no agreement has yet been approved.”
Under ‘Subsequent events’ the CUFSS directors say “the board believes the company remains viable in the short to medium term.
“There has not been any other matter or circumstance … other than the comments made at Note 21 ‘Going Concern’ that has arisen since the end of the financial year, that has significantly affected, or may significantly affect, the operations of the entity, the results of those operations, or the state of affairs of the entity in future years.”
Under ‘Going concern’ the board insists “it is comfortable that the future of CUFSS Limited is viable as a going concern for the short to medium term.
“It is the view of the Board that Members of CUFSS Limited will determine its future.”