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APRA relaxes liquidity rules for foreign banks 

September 8, 2014
John Weavers, IFR Asia

Proposed amendments to Australia’s Basel III compliant liquid asset requirements will relax the rules for foreign banks’ local branches and, as a result, should increase their appetite for higher-yielding repo-eligible assets.

The Australian Prudential Regulation Authority last week acknowledged that foreign bank branches will struggle to access the Reserve Bank of Australia’s committed liquidity facility (CLF) when it takes effect on January 1 2015. In a September 1 discussion paper on liquidity standards, APRA revealed plans to amend the liquidity coverage ratio (LCR) requirement for foreign bank branches.

The regulator designed the original measure to ensure lenders hold enough liquid assets to survive a 30-day funding squeeze. The amended rule, however, says that foreign branches only need enough capital to withstand a 15-day freeze. The regulation for domestic authorised deposit-taking institutions (ADIs) has not changed.

Read more: IFR Asia

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