would also be likely to significantly impair the short - term interbank market in australia, which is an important pricing reference for many other markets. as a result of these considerations, the rba concluded that the fee needed to be set high enough to ensure banks had the appropriate incentives under the liquidity standard, but low enough to not generate unwarranted distortions in the domestic market. interest rate on the facility should a bank need to obtain liquidity under the facility, it will undertake a repo with the bank using its eligible collateral and pay an interest rate on the repo of 25 basis points above the reserve bank board ’ s target for the cash rate. this is the same as the current arrangements for the rba ’ s overnight repo facility. this 25 basis points charge will be in addition to the ongoing access fee of 15 basis points. eligible securities the securities that a bank can hold to access the clf are the same as those which are eligible for the rba ’ s normal market operations. in addition to government paper, these securities include domestic issues by supranationals and other foreign governments, adiissued debt securities and asset - backed securities, including residential mortgage - backed securities ( rmbs ). however for the purposes of the clf, the rba will also allow banks to present certain related - party assets such as self - securitised rmbs. there are a number of reasons for this bis central bankers ’ speeches decision, but the primary motivation is to reduce the systemic risk of excessive crossholdings of bank - issued instruments. as mentioned earlier, a large share of the securities on issue in australia are “ inside ” the banking system. that is, they are securities issued by the banks themselves. the available pool of outside assets in australia which includes securities issued by supranationals and corporates is small. hence, the primary type of asset available in the market to the banking system to meet its liquidity needs is a security issued by another bank. in our judgement, and that of apra ’ s, it would be undesirable for a bank to meet its liquidity needs by significantly increasing its exposure to the rest of the banking system. if a stressed situation was to arise at one bank, the increased cross - holdings could rapidly translate this to other banks. moreover, if the stressed bank was to meet its liquidity needs by selling its holdings of securities issued by other banks into the market, this

rating will be eligible. there will no longer be a requirement that an adi hold an es account with the bank. for securities with longer than 12 months to maturity, the minimum credit rating required is bbb +. margins on asset - backed securities were maintained at 10 per cent. for self - securitised mortgages, and other private securities for which it is difficult to identify a timely market price, the securities will be valued at a price equal to 90 per cent of par, prior to the application of a bis central bankers ’ speeches margin. hence, for example, to obtain liquidity of $ 100 under the clf, a bank will need to present a self - securitised rmbs with a value of $ 122. conclusion i have provided some background to the decisions taken by the reserve bank around the application of the new basel liquidity regime in australia. the new basel standards are designed to ensure that the banking system in australia is even more resilient and stable than it has been to date. while these reforms are not costless to comply with, the benefits of a stable banking system are considerably larger. both ourselves and apra will continue to work together to promote a strong and resilient financial system. bis central bankers ’ speeches