to a competitor who has yet to reprice. in the online account world, the transactions costs of switching are very low, and the evidence is that the response rate to small interest rate differentials is rapid. while there may be more repricing to come, it is worth mentioning that as part of the basel iii liquidity standards, banks are required to demonstrate to apra that they have an appropriate liquidity transfer pricing model. apra is conducting a trial run of the new liquidity regime over the coming year and one might expect these new liquidity pricing models to come into effect as part of that. this will affect not just deposit pricing but pricing on the other side of the balance sheet, namely loans, as well. it will have a particular impact on contingent facilities such as lines of credit. to return to the issue of hqla for a minute. as most of you are aware, there is a shortage of hqla in australia. the stock of government debt on issue, both commonwealth and state, is well short of the liquidity needs of the banking system. hence, as part of the liquidity regime, the reserve bank will be offering banks access to a committed liquidity facility ( clf ). for a fee, the reserve bank will make available sufficient liquidity ( against eligible collateral ) to address the shortfall of hqla beyond the banking system ’ s holdings of commonwealth and state government debt. the motivation for doing so reflects the societal gains that i talked about earlier from the banking system engaging in an appropriate amount of maturity transformation. the pricing of the clf is aimed at replicating the cost of holding hqla in the form of government debt. that is, it is designed to be the same as the liquidity premium embedded in government paper. the fact that there is a cost to the banking system of holding hqla, either in the form of government debt or in the fee paid to have access to the clf, is in keeping with one of the main motivations of the basel iii liquidity regime, namely that banks engage in the appropriate amount of maturity transformation. generally speaking, liquidity was underpriced prior to 2007 with the result that excessive maturity transformation was undertaken, manifest in some cases in highly unstable short - term funding structures. the new liquidity regulation increases the cost of liquidity, but it is not designed to increase the cost so much that insufficient maturity transformation is undertaken from society ’ s point of view. having talked about liquid

well as to the financial system as a whole. liquidity regulation addresses this issue by ensuring that the banking system has some level of liquidity at hand to meet predictable liquidity demands. in the case of basel iii, banks need to have available sufficient liquidity to meet a 30 - day stress scenario. in simple terms, a bank must have enough liquid assets that can be easily liquefied ( not at fire - sale prices ) to meet any of its liabilities that fall due within that 30 - day period. in basel iii, these assets are labelled high - quality liquid assets ( hqla ). see debelle g ( 2013 ), “ the impact of payments system and prudential reforms on the rba ’ s provision of liquidity ”, address to the australian financial markets association and reserve bank of australia briefing, sydney, 16 august. also see stein j ( 2013 ), “ liquidity regulation and central banking ”, speech at the “ finding the right balance ” 2013 credit markets symposium sponsored by the federal reserve bank of richmond, charlotte, north carolina, 19 april. available at < http : / / www. federalreserve. gov / newsevents / speech / stein20130419a. htm > ; coeure b ( 2013 ), “ liquidity regulation and monetary policy implementation – from theory to practice ”, speech at the toulouse school of economics, toulouse, 3 october. available at < http : / / www. ecb. europa. eu / press / key / date / 2013 / html / sp131003. en. html >. bis central bankers ’ speeches this implies that more liquid liabilities, those with less than 30 days to maturity, will be more costly for the bank to provide. hence, one would expect to see an increase in the cost to the customer of obtaining that liquidity service. we have seen this start to occur in australia as the implementation date of basel iii, 1 january 2015, comes into sight. but my sense is that there is more of this repricing still to come. as i have said before, the rate of return available on at - call accounts does not seem to sufficiently reflect the cost to the bank of providing such liquidity. maybe we will have to wait for 31 december 2014 for this to occur, as there is potentially a large first - mover disadvantage from being the first to reprice the product. the lower interest rate is likely to see customers move rapidly