Joint APRA-RBA Statement on Use of the RBA’s Overnight Standing Facility | Media Releases

The Reserve Bank of Australia’s (RBA) new approach to monetary policy implementation – the
‘ample reserves with full allotment’ system – allows eligible counterparties to borrow as
many reserves as they demand at open market operations (OMO). The RBA has recently announced some
important updates to the operation of this system for monetary policy implementation, including the
configuration of its OMO and the role of the overnight standing facility.

These facilities will play an important role to supply reserves needed to keep the cash rate close to its
target. As the system transitions to, and in time reaches, an ample level of reserves, some market
participants may experience periods when their demand for liquidity rises. This could require them to
borrow reserves in private money markets from other counterparties that have a surplus relative to their
needs. If market participants cannot find liquidity on suitable terms in private markets, or via weekly
OMOs, they are expected and encouraged to use the overnight standing facility. Doing so will support the
implementation of monetary policy under the ample reserves system.

The RBA and Australian Prudential Regulation Authority (APRA) consider the use of the overnight standing
facility by banks to be consistent with routine liquidity management activities. Both agencies are
comfortable with banks using the facility as needed. The RBA and APRA will liaise with banks to ensure
that they understand the role of the overnight standing facility and are ready to use it and comfortable
doing so in their liquidity management practices.

Further details on the RBA’s new approach to monetary policy implementation are outlined in a
recent
speech by RBA Assistant Governor, Financial Markets, Christopher Kent. Visit the RBA’s standing liquidity
facilities webpage for more information.