##ity facility, unless they have paid the 15 basis points commitment fee for the clf. in this way, any es balances acquired from the bank ’ s liquidity facility will always represent the exchange of one liquid asset for another and cannot improve an adi ’ s compliance with the liquidity standard. the consequence of this is that small “ drawings ” on the clf will be a routine event as part of normal operations to manage payment flows. provided the funds are repaid same - day or, in the case of open repos, are retained in the adi ’ s es account, there need be no cost to using the facility in this way. however, should the funds be used for any other purpose such that the balance on the account is below where it should be, the penalty will be 25 basis points above the cash rate target. such a use of the clf is likely to occur in more stressed circumstances. as i mentioned earlier, 25 basis points has long been the penalty rate attached to the bank ’ s liquidity facility and it is designed to discourage adis from relying upon the facility for funding purposes during normal times. in a stress scenario, of course, this penalty rate of 25 basis points may not appear so onerous. that is by design. in such circumstances, it is appropriate that the central bank provides liquidity support against suitable collateral. this principle of central banking dates back at least to bagehot : lend against good collateral at a penalty rate but not a penal rate. the experience here in australia over many years is that this penalty of 25 basis points has been sufficient to ensure that there has not been excessive use of the central bank ’ s liquidity facility. the usage of this facility is published on the website with a small lag and recorded in the bank ’ s annual reports in the chapter on operations in financial markets. even in the stressed environment of 2008 and 2009, the facility was only drawn on a couple of times for small amounts, and for no longer than one day, to deal with unexpected payment flows. technical details of the clf and its relationship to the reserve bank ’ s existing liquidity facility can be found on the bank ’ s website. bis central bankers ’ speeches to put the rationale for the clf another way, the purpose of holding liquid assets is to sell them during periods of stress. in the australian context, this will mean using funds raised via the clf. this need not be the “ last resort ” ; that

bank – are strongly encouraging financial institutions and corporations that use derivatives contracts referencing libor to review and, wherever practical, adhere to the isda protocol. [ 5 ] so if you haven't already signed the protocol, we'd urge you to do so as soon as possible. there is also a lot of good work going on across industry to develop robust fallbacks for non - derivatives products. this must proceed in a timely way so that these other contracts are also protected when libor ends after 2021. some more details last year the fsb published a global transition roadmap. this describes all of the steps involved and the relevant timelines for financial market participants. [ 6 ] for example : by now you should have identified and assessed all existing libor exposures and be following a detailed plan to manage your transition before the end of 2021. financial institutions should already be offering non - libor linked loans to their customers. if your bank is not doing so, ask why. if you are not satisfied, find a bank which does offer such products. firms should also adhere, if they haven't already, to the isda ibor fallbacks protocol. by the middle of this year, firms should have established formal plans to amend legacy contracts where this can be done. they also need to have implemented the necessary changes to their systems and processes to enable transition to robust alternative rates. asic, apra and the reserve bank have published a more detailed checklist of the range of things you need to include in your transition plans. [ 7 ] if you follow these steps in a timely manner, your institution will be ready for the end of libor. banks'libor transition plans are proceeding. progress in stakeholder education and the required changes to contracts, systems and processes is in train. it was very pleasing to see overall notional exposures to libor declining over the course of 2020 for the key australian institutions. it was disappointing though to see that exposures had increased at some individual institutions. that needs to reverse course over the next 9½ months. regulators everywhere – including in australia – will be taking action as required to ensure that risks are appropriately managed. key libor messages in short, by the end of 2021, institutions must have already transitioned to alternative reference rates, and for existing contracts where that's not possible, robust fallback provisions must be in place to make clear what the replacement rate will be when libor ends. any firms that have not done