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Reserve Bank announces new facility and removal of credit tiers - 20 March 2020

Term Auction Facility

The Reserve Bank today announced a facility which is intended to support banking system liquidity. From 20 March 2020, the Reserve Bank will offer to lend funds through the Term Auction Facility (TAF).

The facility will operate in a similar manner to the Reserve Bank's Open Market Operation (OMO) and will be used to inject cash into the banking system using approved eligible collateral noted on the Reserve Bank's website.

The TAF will be offered daily at 9.30am in lieu of the day’s OMO. The TAF can offer terms of approximately 3, 6, and 12 months. The Reserve Bank reserves the right to alter both the volume and maturity dates at its discretion.

The operation of this facility and the rules and guidelines applying to it will be similar to the OMO. These details can be found on the Reserve Bank's website.

Bids in the tender will be accepted between 9.30am and 9.45am and it is expected that results will be announced at approximately 10.00am.

Settlement will occur on a T+1 basis (transaction day plus 1 banking day).

This facility will be reviewed in 12 months' time or sooner if demand diminishes.

Monetary Policy Implementation Framework

The Reserve Bank also announced the following changes to its monetary policy implementation framework, to ensure that short-term interest rates continue to trade near the Official Cash Rate (OCR) in an environment with a higher settlement cash level:

From 20 March 2020:

  • Allocated credit tiers for ESAS account holders will be removed, and all ESAS credit balances will be remunerated at the OCR.

Other facilities and their pricing remain unchanged:

  • Bonds lent through the Bond Lending Facility will continue to be lent at the OCR less 50 basis points.
  • A maximum rate will continue to be set for bonds lent through the Repo Facility at the OCR less 50 basis points.
  • Cash will continue to be lent via the Overnight Reverse Repo Facility at the OCR plus 25 basis points until further notice.

The Reserve Bank will monitor the use of our facilities and the use of ESAS settlement accounts. We expect cash to be distributed efficiently throughout the banking system. We will review activity and our framework as needed.

For further operational information contact:

Dean Hill
Senior Manager, Financial Markets
[email protected]

Media contact:

Brendan Manning
Senior Adviser External Stakeholders
DDI: +64 9 366 2643 | MOB: 021 923 217
Email: [email protected]