regulation is how many of these assets need to be held. in this regard, the basel iii liquidity framework makes certain assumptions about the likely calls on liquidity that a bank would experience during a 30 - day period of stress. one assumption, based strongly on the experience of the past five years, is that any liquidity commitments adis have made to other financial institutions, including structured investment vehicles and conduits, will be called upon in full during the stress scenario. this has significantly lessened the incentives for structures designed to exploit opportunities for regulatory arbitrage, such as the conduits that issued asset - backed commercial paper. again, though, the decline of many of these structures can hardly be attributed solely to regulatory change. their viability was undermined when investors and ratings agencies also came to the view that the quality of such instruments was largely tied to the quality of the supporting institution. this has also seen a decline in the number of mortgage warehouses, as the providers of the warehouses have significantly increased the price to account for the much greater liquidity risk. most non adi mortgage providers don ’ t really have a balance sheet to warehouse the mortgages on, so we have seen a marked decline in their number and market share over the past five years. in terms of the support that an adi provides to its internal business units, changes to the regulatory framework will alter how adis price liquidity and capital usage across the different components of their businesses. by their nature, these internal prices are rarely transparent to outside observers, but the incentives created by such transfer prices can have significant implications for financial markets. this repricing across all product lines is going on currently and still has some way to run. we have already seen its effect on the pricing of undrawn lines of credit, for example, where the increase in the price resulting from their increased liquidity cost has seen a marked reduction in their prevalence. heath a and m manning ( 2012 ), “ financial regulation and australian dollar liquid assets ”, rba bulletin, september, pp 43 – 52. bis central bankers ’ speeches another example, observed by the rba through our market operations, has been the tendency for government bond dealers to fund their positions at rates that exceed the unsecured borrowing rates in the interbank cash market. to the extent that unnecessarily high internal funding rates on these trading desks have fostered such an outcome, the new liquidity regulations may well encourage some revision to these practices

ric battellino : housing affordability in australia background notes for opening remarks by mr ric battelino, deputy governor of the reserve bank of australia, to the senate select committee on housing affordability in australia, melbourne, 24 april 2008. * * * the reserve bank is very pleased to have been invited to participate in this inquiry into housing affordability. the terms of reference of the committee are wide - ranging and extend well beyond the areas in which the reserve bank has expertise. we will therefore limit our remarks to four areas – namely house prices, housing affordability, housing loan arrears and the rental market. the key points we would like to make are as follows : 1. the increase in house prices in australia since the mid 1990s, while very large, has been part of a broad trend evident in most other developed economies. this suggests that the main forces that have underpinned this rise have been global in nature, rather than country - specific. 2. traditional measures of housing affordability have declined since the mid 1990s. specifically, housing loan repayments have risen strongly relative to incomes. the overwhelming factor that has led to this is the rise in house prices ; mortgage interest rates in australia are no higher today than in the mid 1990s, when housing was at its most affordable. 3. despite the sharp fall in traditional measures of housing affordability, arrears rates on housing loans remain low by historical standards. to some extent, this is a sign of the extraordinary commitment of australian households to meeting their housing loan repayments, even in the face of financial pressure. it is also the case, however, that for the household sector as a whole, rising levels of income have allowed households to devote a larger share of their income to housing repayments, while maintaining or even increasing their overall living standards. this has meant that, for many households, traditional benchmarks of affordability – such as the often - quoted 30 per cent rule – may now be somewhat dated. while the picture on arrears for the household sector as a whole is quite benign, there are nonetheless significant pockets in the community where the high price of housing is causing financial distress. 4. the rental market is currently very tight, with vacancy rates at low levels and rents rising quickly. this comes after a decade when rents increased by much less than the price of houses, causing rental yields to fall to levels that discouraged increases in the supply of rental properties. it is hard to avoid the conclusion that the rental