Media Release Measures to Enhance the Functioning of Financial Markets

Today the RBA is announcing two measures to contribute to the smooth functioning of domestic financial markets:

• A foreign exchange swap facility with the Federal Reserve to address the elevated pressures in US dollar short-term funding markets in the Asian time zone;
• A domestic term deposit facility to further enhance the flexibility of domestic liquidity management operations.

Reserve Bank of Australia and US Federal Reserve Announce Swap Facility

Today, the Federal Reserve, the Reserve Bank of Australia, Danmarks Nationalbank (National Bank of Denmark), Norges Bank (Bank of Norway), and Sveriges Riksbank (Bank of Sweden) are announcing the establishment of temporary reciprocal currency arrangements (swap lines) to address elevated pressures in US dollar short-term funding markets. These facilities, like those already in place with other central banks, are designed to improve liquidity conditions in global financial markets. Central banks continue to work together during this period of market stress and are prepared to take further steps as the need arises.

The Reserve Bank of Australia and the Federal Reserve have agreed on a US$10 billion swap line to provide US dollar liquidity in Australia in exchange for Australian dollars. The swap serves to alleviate a shortage of US dollar liquidity which has affected market participants around the world including in the Asia-Pacific time zone. The US dollars will be made available against collateral to local market participants by the Reserve Bank through an auction. The first of these auctions will be conducted on Friday, 26 September for settlement on Monday, 29 September. The term of the initial swap will be 28 days. Subsequent auctions will depend on market conditions. Announcements will be made via the electronic news services (Reuters – RBA33; Bloomberg – RBA20) on the previous business day.

Term Deposit Facility

To further enhance the flexibility of its domestic liquidity management operations, the Reserve Bank will offer a short-term deposit facility (to be known as RBA Term Deposits). The facility will be available to those institutions holding an Exchange Settlement Account (ESA) and to authorised deposit-taking institutions (ADIs) that are members of RITS.  The Bank will conduct auctions at which eligible institutions will be able to bid for deposits.  The first of these auctions for a deposit of 14 days will be held on Monday, 29 September for settlement on Tuesday, 30 September. Participants intending to bid must pre-register with the Bank by close of business on Friday, 26 September. Subsequent auctions will be conducted periodically as required for liquidity management purposes. Tender announcements will be made via the electronic news services (Reuters – RBA35; Bloomberg – RBA15) at 4.00 pm the previous business day.

Information on the specific details for RBA Term Deposits is set out on the Reserve Bank's website.

Information on the specific details of the swap facility and the auction is also available on the Bank's website.

Information on similar actions taken by other central banks is available at the following websites:

Federal Reserve System (http://www.federalreserve.gov)

Danmarks Nationalbank (http://www.nationalbanken.dk/dnuk/specialdocuments.nsf)

Norges Bank (http://www.norges-bank.no)

Sveriges Riksbank (http://www.riksbank.com)

Bank of Canada (http://www.bankofcanada.ca)

Bank of England (http://www.bankofengland.co.uk)

Bank of Japan (http://www.boj.or.jp/en)

European Central Bank (http://www.ecb.int)

Swiss National Bank (http://www.snb.ch)