Speech
The Reserve Bank's Policy Actions and Balance
Sheet
[*]
Guy Debelle
Deputy Governor
The Economic Society Australia
Online - 30 June 2020
Australia is experiencing an historic event. It is first and foremost a health event. Thankfully, thus far
the health outcomes in Australia have been better than feared. The health decisions taken by the
government and the public in response to the virus have been the primary shaper of the economic
and financial landscape that the Reserve Bank has been operating in.
The virus has had a large economic and financial impact. The decline in output in the second quarter
in Australia and around the world has been extraordinary, as significant parts of the economy were
shut down. The decline in output is much larger and much more widespread globally than we saw in
2008. Accompanying this, there has been a large decline in hours worked. Unemployment has risen
sharply, although the extent of the rise in the unemployment rates has varied around the world
depending on the nature of the support provided by governments (as well as some definitional
differences). In Australia, the rate of unemployment is high at 7 per cent, but has been materially
contained by the JobKeeper package that has helped to maintain the employment relationship
between workers and businesses. This will help considerably in the recovery.
Overlaid on top of the health and economic developments was a full-scale financial market disruption
in March. Again this was global in nature, most notably including the dislocation to the US Treasury
market, which serves as a critical pricing benchmark for global financial markets. There was an
imperative to prevent a financial crisis exacerbating the significant impact of the health and economic
shocks.
In that environment, policy actions were taken in Australia on multiple fronts including fiscal,
monetary and prudential. Reflecting these policy actions and the health outcomes, the Australian
economy has turned out to be somewhat better in the June quarter than feared. While the outcomes
to date have been better than expected, it is important to remember that the declines in GDP and in
hours worked have still been historically large.
The objective of the monetary policy response is to support the economy by keeping borrowing costs
low and credit available for households and businesses, complementing the necessary and large
fiscal policy stimulus. It has also sought to address the disruption in financial markets, particularly in
the government bond market, given the central role that the market plays in underpinning the
interest rate structure in the Australian financial system. The response had a number of elements.
1. A reduction in the cash rate target to 25 basis points. This is the level the Reserve Bank
Board has assessed to be the lower bound for the target cash rate in the current
circumstance. In saying that, we fully expected the actual cash rate to move below
25 basis points, as it subsequently has. I will explain this shortly.
2. A target for the yield on three-year Australian Government bonds of around 25 basis
points. The Reserve Bank commenced a program of buying government bonds to achieve
that target and also to address the dysfunction in the market for both Australian
Government bonds and the bonds of the state governments (semis).
3. The Reserve Bank's daily market operations were expanded in size and in maturity in
response to the large increase in demand for liquidity from the banking system.
4. A Term Funding Facility (TFF) for the banking system to provide three-year funding at a
rate of 25 basis points. This was complemented by the Australian Office of Financial
Management's (AOFM's) program to support non-bank lenders.
5. Setting the rate paid on Exchange Settlement (ES) balances at the RBA at 10 basis points.
In the rest of this talk, I will explain these policies in more detail and provide an assessment of their
effectiveness thus far. These policies have also had a material impact on the size and the
[1]
composition of the Reserve Bank's balance sheet, which I will describe (Graph 1). I will also
explain the other main influence on the size of the RBA's balance sheet, which results from the fact
that the RBA is the banker for the Australian Government.
Graph 1
Reduction in the Cash Rate Target to 25 Basis Points
The reduction in the cash rate target to 25 basis points is standard monetary policy. It has affected
the interest rate structure of the economy in a similar way to other earlier reductions in the cash rate
target.
However, while the cash rate target has remained at 25 basis points, the actual cash rate traded in
[2]
the market has declined to around 13-14 basis points currently. This decline in the cash rate was
expected and is consistent with the aim of reducing funding costs in the Australian economy. It
reflects the large amount of ES balances in the system. I will come to the reasons why ES balances
are high shortly. But with high ES balances in the cash market, the supply of these balances is large
relative to demand. Hence, as in any market, with supply greater than demand, the price to clear
[3]
that market, the cash rate, has declined.
The cash rate is higher than the rate of return on ES balances of 10 basis points. Banks are
incentivised to lend their excess ES balances held at the RBA but the transaction costs and greater
credit risk involved mean that they are generally willing to do so only if they can earn a return a few
basis points more than they get from leaving their balances on deposit at the RBA at 10 basis points.
The transaction volumes in the cash market have declined (Graph 2), reflecting the fact that on any
given day most banks have enough ES balances to meet their liquidity needs. But depending on the
distribution of payment flows throughout the day, even with large ES balances, some banks may still
[4]
need to borrow at the end of the trading day to ensure their ES balances remain positive. It is
worth remembering that the banking system as a whole has to hold the level of ES balances supplied
by the Reserve Bank. So while any individual bank may try to lend their excess ES balances, at the
end of the day, some bank in the system has to hold them.
Graph 2
The higher level of ES balances in the system has not only meant that the cash rate trades closer to
the rate the Reserve Bank pays on these balances, but also anchors other money market rates such
as short-term repos (repurchase agreements), foreign exchange (FX) swaps and bank bills. With
these money market rates anchored, the full spectrum of borrowing rates for households, business
and governments is also at historically low levels. I will come back to this later.
It is worth noting that once the supply of ES balances is sufficiently high to lower these rates
towards the rate on ES balances, the exact amount of ES balances has little effect on where the cash
rate and other money market rates trade. That is, additional ES balances do not tend to lower
market rates any further. Nor does a reduction increase market rates as long as ES balances remain
sufficiently high. Since late March, ES balances have moved in a very wide range between $40 billion
and $90 billion without having a noticeable effect on money market rates.
The market expectation is that the cash rate will remain around its current level of 13-14 basis
points for at least the next year (Graph 3). This is consistent with the Board's guidance that the cash
rate target will not be raised until progress is being made towards full employment and it is confident
that inflation will be sustainably within the 2-3 per cent target band. Given the outlook for inflation
and the labour market, this is likely to be some years away.
Graph 3
Target for the Three-year Australian Government Bond
Yield
The Board has announced a target for the three-year Australian Government bond yield of around
25 basis points. As I just said, given the outlook for unemployment and inflation, the Board expects
that the cash rate will remain at its current low level for some years. The target for the three-year
[5]
bond rate reinforces the forward guidance on the cash rate.
At the same time, the Reserve Bank also stands ready to purchase Australian Government bonds to
address market dysfunction. In March, bond markets around the world were very dysfunctional. This
included the market for US Treasuries, which sits at the core of the global financial system. US
[6]
Treasuries are a critical benchmark for pricing in global financial markets.
Australian Government bond market and other advanced economy bond markets:
A desperate scramble for cash: portfolio managers and other investors sought to increase
the amount of cash in their portfolios, in part to meet redemption requests and margin
calls and in part reflecting asset reallocation by their investors. The portfolio managers
achieved this by selling the most liquid part of their portfolios, which was often fixed
income and particularly government bonds.
Rebalancing: as equity prices declined but the value of bonds rose sharply (bond yields
declined), asset managers rebalanced their portfolios by selling bonds and buying
equities.
Leveraged trade unwinds: Leveraged traders in the government bond market had
positions exploiting small pricing 'discrepancies', such as the difference between bond
futures and the underlying bonds they reference as well as between these reference or
[8]
'on-the-run' bonds and the 'off-the-run' bonds. Because these discrepancies are
generally very small, leverage is required to make the trades worthwhile. As interest rate
volatility increased, these traders were required to unwind these positions, generating
further selling pressure and even higher interest rate volatility.
Foreign exchange intervention: a number of emerging economy central banks intervened
in their foreign exchange markets to support their exchange rates as they depreciated.
This involved selling US Treasuries and other bonds in their foreign reserves portfolios,
including Australian Government bonds. The effect of these sales are evident in the TIC
data in the US and in Australia's balance of payments statistics for the March quarter,
which showed a marked decline in the foreign holdings of Australian Government bonds
(Graph 4).
Dealer balance sheet constraints: investors sell their bonds to the dealers who act as the
main intermediaries in the bond market. In the face of the large selling pressure, dealers
were constrained in their ability to absorb these flows by the changed regulatory
environment over the past decade as well as their own internally imposed risk limits.
Whilst this should not have been that surprising, it nevertheless increased the degree of
[9]
price volatility and dysfunction in the market.
The dysfunction was evident in the heightened interest rate volatility in the bond market, reflecting
the reduced liquidity even in the US Treasury market, which is generally regarded as being amongst
the most liquid of all markets. It was also evident in a widening in bid/ask spreads (Graph 5), that is,
the difference between the prices at which a dealer is willing to buy and sell a bond. At times, the
dysfunction was such that government bond prices fell (yields rose) at the same time as equity
prices were also falling, when normally the opposite is the case, reflecting the important role that
government bonds play as a hedge.
As was the case with many other central banks, the Reserve Bank bought government bonds in the
secondary market to try to alleviate the dysfunction in the Australian government bond market.
These purchases helped to restore the functionality to this important pricing benchmark in the
[10]
Australian financial system, which serves as the risk-free pricing curve for most financial assets.
Clearly, an effectively functioning bond market is also necessary to allow governments to issue bonds
to finance the fiscal stimulus.
The Reserve Bank bought bonds at or near the three-year horizon to achieve the three-year yield
target but also along the yield curve to help achieve the target and address the market dysfunction.
Graph 6 shows the bonds the RBA has purchased by maturity. To date, we have purchased just over
$40 billion in Australian Government bonds. The graph shows that a sizeable share of the purchases
were in off-the-run bonds out to the 10-year bond. These purchases significantly reduced the
constraints on dealer balance sheets, which facilitated a faster return to a more functional bond
market.
The RBA chose not to buy bonds beyond the 10-year maturity, nor indexed bonds. These bonds play
a less important role as a pricing benchmark in the economy. Very few other financial instruments
price off them. Our assessment was that bond purchases could be more effectively directed to
restoring functionality in the parts of the yield curve that are typically quite liquid. This would see
functionality return to these other parts of the market over time. Indeed, that has turned out to be
the case. The RBA's purchases in the second half of March and into April helped to improve the
functionality in the broader bond market and achieved the Board's target for the three-year bond
yield of around 25 basis points (Graph 7). The improved functionality of the market has occurred
alongside very sizeable issuance by the AOFM, which has been met with very strong demand.
The three-year bond yield has been consistent with the Board's target and the government bond
market has been functioning effectively for a number of weeks now. If the three-year bond yield
target is credible to the market, then the Reserve Bank does not need to purchase many bonds at all
to achieve the target. Indeed, that has been the case over the past month or so and the RBA has not
needed to buy any bonds since early May. Nevertheless, the RBA stands ready to scale up its
purchases if necessary to achieve these objectives.
The Reserve Bank has also purchased state government bonds (semis) to improve the functioning in
that market. The state governments also require a functioning bond market to be able to finance
their fiscal stimulus. Again these purchases were conducted in the secondary market. To date, these
purchases have totalled $11 billion and the amount of bonds bought from each state has been
broadly proportional to their size. Conditions in the semis market have also returned to their
preCOVID state and the state borrowing authorities have also been able to issue sizeable amounts of
bonds in a short period of time.
With the cash rate around 13-14 basis points and the target for the three-year Australian
Government bond yield around 25 basis points, one would expect yields on bonds with maturities
between the overnight cash rate and three years to be no more than around 25 basis points.
However, those bonds with maturities shorter than the three-year futures basket are off-the-run and
tend to be less in demand. They can trade at a higher yield than bonds included in the futures
basket, reflecting their lower liquidity. We would not expect the illiquidity premium to be very high. If
these yields were to be noticeably above the three-year target, this would be inconsistent with a
gradually upward sloping yield curve between cash and three-year yields. It would also be
inconsistent with the policy objective of lowering borrowing costs. Hence the Reserve Bank is
prepared to buy these bonds should their yields rise too high for a sustained period.
The Reserve Bank is also continuing its long-run practice of buying Australian Government bonds
that are very close to maturity (less than 18 months) for liquidity management purposes. An
individual bond line can often have between $20 billion and $30 billion on issue. When a bond
matures, there is a large increase in liquidity in the system as the Government repays the
bondholders. We have been buying these near-to-maturity bonds for many years to reduce the
impact on system liquidity when they mature. Currently, there is less need for tight liquidity
[11]
management as overall system liquidity is so much higher. But it is still desirable to avoid the
large increases in ES balances that occur when a bond matures, so we have continued these
[12]
operations. These purchases also support an effectively functioning bond market.
When the RBA is buying government bonds, we are buying them in the secondary market. That is,
they are bonds that have been issued to investors some time earlier. The RBA buys these bonds via
an auction mechanism with the dealer panel banks as counterparties, though the dealers in turn
have been sold the bonds from other investors. The RBA is not participating in any of the AOFM's
bond tenders and does not purchase bonds directly from the state government borrowing
authorities.
As the RBA buys government bonds, the amount of ES balances in the system increases as we credit
[13]
the accounts of the banks that we buy them from. These purchases are not sterilised. The
$50 billion of bond purchases have increased ES balances and provided a substantial boost to the
liquidity in the system. Other factors also affect the level of ES balances, as discussed below, which
have offset some of this impact.
Upon maturity of the bonds that the RBA holds, the Government repays the funds to the RBA in the
same way it does every other holder of the maturing bond. In terms of the RBA's balance sheet,
there is a decrease on the asset side by the amount of the maturing bonds the RBA holds. On the
liability side of the RBA's balance sheet there is a matching decrease in the Government's deposit
account at the RBA, as the Government uses the funds it has accumulated there to repay the RBA.
While the bond purchases by the RBA increase liquidity in the system, I do not see this posing any
risk of generating excessively high inflation in the foreseeable future. Indeed, the opposite seems to
be the more likely challenge in the current economic climate, that is, that inflation will remain below
the RBA's target. Nor do I see any issue at all with the capacity of the Government to repay the
bonds it has issued. Firstly, even with the increased issuance to fund the fiscal stimulus, the stock of
government debt relative to the size of the Australian economy remains low. Secondly, the
Government is borrowing at yields that are very low historically. Importantly, the yields on
government debt are considerably below the long-run growth rate of the economy; that is, r is less
than g. While ever this remains the case, as Olivier Blanchard has highlighted, there are no concerns
[14]
at all about fiscal sustainability from increased debt issuance. This is because growth in the
economy will work to lower government debt as a share of nominal GDP.
Provide Liquidity to the Financial System
As the dysfunction in markets intensified in March, the RBA responded to the increased demand for
liquidity by significantly increasing the supply of liquidity in its daily market operations. This alleviated
funding pressures in the banking system and met the increase in precautionary demand for liquidity.
[15]
(The RBA undertook similar actions in the financial crisis in 2007-08. ) Through March and April,
the RBA increased the size of its daily operations and provided regular three and six-month terms in
its repo operations to meet this demand for liquidity. These operations also boosted ES balances.
The ES balances are a liability for the RBA on its balance sheet (and a corresponding asset for the
banking system). The asset side of the RBA's balance sheet rises in the form of the collateral posted
to the RBA as the banking system accesses these funds through repurchase agreements (repos).
In recent weeks, there has been much less demand for funding at the Reserve Bank's daily market
operations. This is because financial conditions have stabilised and because the liquidity position of
the banking system is now much greater, with ES balances at a high level. Indeed, some of those
earlier liquidity injections in March are now maturing. As they mature we expect them to be
replaced, but probably not one for one, again reflecting the ample liquidity in the system (as well as
the availability of the TFF). Given this, the RBA will scale back the frequency of its longer-term
[16]
offerings. Currently, for the terms it offers, the RBA is prepared to satisfy whatever amount of
funding is demanded in its daily market operations to keep money market rates low. If liquidity
conditions were to tighten up, we would expect to see more demand in our daily operations, which
we would be prepared to accommodate.
The ample amount of liquidity in the system is sufficient to ensure that money market rates remain
at low levels. The cash rate remains low at around 13-14 basis points. Market expectations derived
from the overnight indexed swap (OIS) curve imply it should stay around this level for at least a
year. Repo rates are around 18 basis points. Reflecting the large amount of system liquidity as well
as strong deposit growth in the banking system, the rate at which banks can borrow in the money
market - the bank bill swap rate (BBSW) - is also at a low level (Graph 8). It is currently trading with
close to no spread relative to OIS. The low level of these money market interest rates are materially
contributing to the lower borrowing costs for households and businesses.
Graph 8
Term Funding Facility
[17]
The RBA has also announced a Term Funding Facility (TFF). This provides three-year funding for
the banking system (secured against appropriate collateral) at a fixed interest rate of 25 basis points.
One can think of this as equivalent to the repo transactions in the RBA's daily market operations, but
for a considerably longer term than normal. Under this facility banks can borrow an amount up to
3 per cent of their loan book until the end of September. They are able to draw on additional
amounts if they increase their lending to businesses, particularly small and medium-sized businesses.
The cost of funding available to the banking system under the TFF at 25 basis points is significantly
lower than the cost of three-year funding in the market, which is currently around 75 basis points for
the major banks, and even lower relative to the cost of funding in the market for the regional and
smaller banks. Hence the TFF is contributing to a lower cost of funding for the banking system and
thereby to lower household and business borrowing costs. In aggregate, the initial TFF allocation is
sufficient to replace all of ADIs' maturing bond funding over the next six months.
We have seen the announcement of the TFF contribute to lower borrowing costs even though the
total drawings by banks under the TFF have been modest to date relative to the size of the available
[18]
funding. So far, over 60 institutions have drawn on the TFF, with smaller institutions drawing a
higher share of the funding available to them. We expect increased drawings in the coming months
as banks use the TFF funds to replace maturing wholesale funding.
The strong growth in deposits has reduced the immediate need for TFF funding (Graph 9). Some of
that deposit growth was likely temporary as businesses drew on precautionary lines of credit and
placed the funds drawn on deposit at a bank. And we have seen some of this reverse since April. But
some of the increase in deposits is likely to be more long-lasting.
Graph 9
Hence as a result of the RBA's recent policy actions, there has been a substantial increase in system
liquidity in the form of ES balances held by the banking system, which is evident on the RBA's
balance sheet. This increase in system liquidity is coming through a number of channels: the RBA's
daily market operations; drawings under the TFF; and the RBA's purchases of Australian Government
bonds and semis.
These policy actions are working as expected. The target for the cash rate, the level of the actual
cash rate and the target for the three-year Government bond yield mean that these important pricing
benchmarks anchor a low risk-free yield curve in the Australian financial system. Together with the
liquidity provided through market operations and the TFF, this has lowered the cost of funding for
the banking system. In turn, this has been transmitted through to lower borrowing costs for
households and businesses (Graph 10).
Banker for the Australian Government
Let me briefly talk about one other factor that has a major influence on the RBA's balance sheet,
namely Government transactions. As banker for the Australian Government, the Government's
transactions in the form of spending, taxation and debt raisings all settle across the RBA's balance
sheet. For example, when the Government issues a bond to investors, it deposits the money raised
from the investors in its account with the RBA. This removes funds from the system. Similarly,
payments such as tax withdraw liquidity from the system as the payments flow through to a deposit
in the Government's account. Conversely, government spending puts money into the system as the
spending ends up as deposits in someone's bank account.
In normal times, the RBA aims to sterilise the impact of such transactions on system liquidity to
ensure that the cash rate remains at the target set by the Board. But with system liquidity at a high
level, this is no longer necessary.
[19]
As a result, ES balances will fluctuate with these Government flows. These flows can be quite
large and move ES balances significantly. Particularly obvious is the settlement of $19 billion of the
December 2030 bond on 21 May, which was the largest bond syndicated in Australian history and
resulted in a large rise in Government deposits (Graph 11).
The RBA has historically sterilised the effect of government transactions either with domestic repos
or foreign exchange swaps. With the focus on supporting domestic liquidity, the RBA's foreign
exchange swap book for domestic liquidity management has gradually matured to be zero
[20]
currently. This decline in the FX swap book is evident on the RBA's balance sheet. It is important
to remember that these foreign exchange swap transactions have no impact on the Australian dollar
and are solely undertaken for domestic liquidity management.
Conclusion
To conclude, the Australian economy has been significantly affected by the virus and the associated
health policy actions. This has warranted a comprehensive policy response from both fiscal and
monetary policy. The monetary policy response has been directed at supporting households and
businesses by keeping funding costs low and ensuring credit is available. The monetary policy
actions have worked as expected by lowering the key interest rate benchmarks in the economy to
historically low levels, which has been transmitted through to historically low borrowing rates for
households and businesses, as well as governments.
The Reserve Bank's policy response has also resulted in large changes in its balance sheet, and I
have sought to provide a guide to them. The size of the balance sheet can be affected by a number
of factors in addition to the Bank's policy actions and as such, is not the best way to assess the
stance of policy.
Recent data indicate that the outcomes in the Australian economy have been better than earlier
feared. But we should not lose sight of the fact that the decline in the economy and the impact on
households and businesses is historically large. Notwithstanding the better than feared outcomes,
the fiscal and monetary support that has been provided was, and remains, warranted.
There is considerable uncertainty over the path from here. This uncertainty includes the behavioural
responses as health restrictions are eased. There is also considerable uncertainty about the future,
which will affect the decisions of businesses and households. It has taken a long time to recover
from large declines in the economy in the past. The cause of the decline this time is much different
from those in the past. Many of the imbalances that exacerbated declines in previous downturns are
not present this time. But it is still quite likely that this decline will have a long-lived impact that will
require considerable policy support for quite some time to come. While much of that support is likely
to be on the fiscal side, the Reserve Bank will maintain the current policies to keep borrowing costs
low and credit available, and stands ready to do more as the circumstances warrant.
Endnotes
[*]
Thanks to Chris Becker, Matt Boge and Ellis Connolly for their assistance with this talk, and the RBA staff who have
operationalised the Board's policy decisions over recent months.
[1] The details of all of these operations, as well as the statistics on their usage, can be found on the RBA website.
[2] Recall that the cash rate is the overnight interest rate at which banks borrow and lend their ES balances at the RBA
to ensure they maintain a positive balance in their account.
[3] A similar dynamic has been seen in other equivalent markets around the world as central banks have increased the
supply of liquidity, both in the global financial crisis and again in the current episode.
[4] Hing A, G Kelly and D Olivan (2016), 'The Cash Market', RBA December, pp 33-41.
Bulletin,
[5] The expectations theory of the term structure implies that the three-year Government bond yield should be
approximately equal to the expected path of the cash rate over the next three years, with some (potentially small)
compensation for uncertainty over that three-year horizon.
[6] A functioning bond market is also important for ensuring that the plumbing of the financial system is functional, in
terms of repo financing and collateral provision more generally. Singh M and J Aitken (2010), 'The (Sizable) Role of
Rehypothecation in the Shadow Banking System', IMF Working Paper 10/172. M Singh (2020), Collateral Markets
and Financial Plumbing, Risk Books.
[7] Fleming M and F Ruela (2020), 'Treasury Market Liquidity during the COVID-19 Crisis', Liberty Street Economics,
Federal Reserve Bank of New York, April. Available at
<https://libertystreeteconomics.newyorkfed.org/2020/04/treasury-market-liquidity-during-the-covid-19-crisis.html>.
Hauser A (2020), 'Seven Moments in Spring: Covid-19, financial markets and the Bank of England's balance sheet
operations', speech on 4 June, Bloomberg, London. Available at
<https://www.bankofengland.co.uk/-/media/boe/files/speech/2020/seven-moments-in-spring-covid-19-speech-byandrew-hauser.pdf?la=en&hash=43D022917D76095F1E79CBDD5D42FCD96497EA5F>.
[8] 8 LTCM in 1998 is an example of these sorts of strategies. See also Becker C, A Fang and JC Wang (2016),
'Developments in the Australian Repo Market', RBA Bulletin, September, pp 41-46.
[9] Debelle G (2018), 'Lessons and Questions from the GFC', Address to the Australian Business Economists Annual
Dinner, Sydney, 6 December.
[10] The US Treasury market started to stabilise as the Federal Reserve began large purchases of US Treasuries. The
stabilisation of the US Treasury market contributed to improved conditions in other markets around the world.
[11]
The AOFM has currently suspended its buyback program of bonds, which also increases the size of the possible
impact on liquidity when these bonds mature.
[12] Some bond holders have a mandate that prevents them from holding bonds with less than one year to maturity.
Hence we can see increased selling of bonds as they approach this time to maturity.
[13] That is, the RBA does not undertake market operations to withdraw the additional ES balances from the system.
[14] Blanchard O (2019), 'Public Debt and Low Interest Rates', American Economic Review, 109(4), pp 1197-1229.
[15] See Debelle G (2018), 'Lessons and Questions from the GFC', Address to the Australian Business Economists Annual
Dinner, Sydney, 6 December.
[16] Dealing intentions are posted to the market data services prior to daily open market operations and then
republished on the Reserve Bank website in statistical table A3.
[17]
Refer to the Reserve Bank website for more details on the Term Funding Facility:
https://www.rba.gov.au/mktoperations/term-funding-facility/overview.html.
[18] The TFF is however having a significant effect in boosting banks' liquidity coverage ratios (LCR) as APRA recognises
the banks have access to the facility.
[19] Banknote issuance and transactions by other Reserve Bank clients also continue to have a liquidity impact but tend
to be much smaller and less volatile.
[20] This is evident in the data we publish on our foreign exchange operations on our website in Table A4.
The materials