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

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.