Term Funding Facility Notifications

This page is where the Reserve Bank publishes amendments to the TFF Operational Notes, and the dates upon which they come into effect.

Notice – 3 November 2020

The following amendments have been made to the TFF Operational Notes.

• New text was added to a paragraph in Section 1, which now reads:

  The Term Funding Facility to Support Lending to Australian Businesses (TFF) was announced on 19 March 2020 as part of a package of measures to support the Australian economy. Under the TFF, the Reserve Bank offers three-year funding to authorised deposit-taking institutions (ADIs) through repurchase transactions. The TFF was amended in September and November 2020 to provide further support (see Market Announcements for 1 September 2020 and 3 November 2020). Prior to the November 2020 Board meeting, TFF funding was provided at a fixed pricing rate of 25 basis points per annum. From 4 November 2020 onwards, new TFF funding is provided at a fixed pricing rate of 10 basis points per annum.

• New text was added to a paragraph in Section 5.2, which now reads:

  Where possible, these amounts will be calculated using data available to the Reserve Bank from existing ADI reporting to APRA. If the ADI does not already report the necessary data to APRA, the ADI must report it directly to the Reserve Bank, as summarised in the below tables. Otherwise the ADI can access only its Initial Allowance and Supplementary Allowance.

• New text was added to a paragraph in Section 5.2.1, which now reads:

  ADIs will need to submit the reporting template by email to TFFNotifications@rba.gov.au ; data submissions should be received by the 15^th business day of the month following the reporting period.^[3] The Reserve Bank will need to verify the submissions using the usual data quality evaluation and query process. Unless otherwise advised, ADIs should follow timelines set out by APRA for the purposes of reporting standards when responding to data quality queries. During the Christmas and New Year's Day public holiday period, APRA may vary the usual timelines for ADIs to respond to data quality queries. If APRA extends the timeline for ADIs to respond to queries during this period, deadlines to respond to Reserve Bank data queries over the Christmas and New Year's Day public holiday period will be extended to match any extension by APRA and, as a result, notification and availability of ADIs' new Additional Allowances may be delayed in January 2021 (see section 7.3).

• A new paragraph was added to Section 6.2:

  If the timeline for the usual data quality evaluation and query process is delayed following a decision by APRA (e.g. to extend the timeline for ADIs to respond to queries during the Christmas and New Year's Day public holiday period), the ongoing notification letter for the impacted month will not be sent to ADIs until after this process is complete.

• New text was added to Section 7.2, which now reads:

  From 4 November 2020, the TFF provides new funding to ADIs at a pricing rate of 10 basis points per annum, fixed for the term of the TFF Repo. ADIs can therefore access three year funding at the fixed pricing rate of 0.10 per cent per annum on new drawdowns under the Additional and Supplementary Allowances from 4 November 2020 until 30 June 2021.

  The pricing rate on TFF Repos entered into under the Initial Allowance, which ceased to be available for further drawdown on 30 September 2020, remains unchanged at the fixed pricing rate of 0.25 per cent per annum.

  ADIs that accessed their Additional and/or Supplementary Allowances prior to 4 November 2020 at a fixed pricing rate of 0.25 per cent per annum will have the option to request to terminate their relevant existing TFF Repo(s) and enter into new TFF Repo(s) at the new lower pricing rate of 0.10 per cent per annum for a funding term of three years from the date of the new TFF Repo transaction(s). To do so, the counterparty should contact the Reserve Bank's Domestic Markets Desk.

  If and to the extent that a TFF Repo which was outstanding on 4 November 2020 was attributable to both the Initial Allowance and the Additional and/or Supplementary Allowance of an ADI, the ADI may terminate the TFF Repo but may only request to enter into a new TFF Repo at the new lower pricing rate of 0.10 per cent per annum (for a funding term of three years) with respect to the portion of the terminated TFF Repo which was attributable to the ADI's Additional and/or Supplementary Allowances. In this limited circumstance, the ADI could also request to enter into a new TFF Repo at the pricing rate of 0.25 per cent per annum with respect to the portion of the terminated TFF Repo which was attributable to the ADI's Initial Allowance. In such a case, the funding term for the new TFF Repo attributable to the ADI's Initial Allowance would be for three years less the elapsed term of the terminated TFF Repo (such that the ‘repurchase date’ for the new TFF Repo attributable to the ADI's Initial Allowance would be the same as the originally scheduled ‘repurchase date’ for the terminated TFF Repo).

  The price differential for each TFF repo (which is an amount akin to interest) is due at maturity or termination of the TFF Repo.

• New text was added to paragraphs in Section 7.3, which now read:

  Funding can be accessed on business days in Sydney or Melbourne (RITS settlement days) during the drawdown period, except on the three business days between the Boxing Day and New Year's Day public holidays (Tuesday 29 to Thursday 31 December 2020 inclusive). TFF Repo requests will not be processed during this period, though settlement of contracted TFF Repos will still occur (i.e. for requests submitted and accepted prior to Tuesday 29 December 2020).

  Individual transactions must be smaller than $10 billion. There is no minimum transaction size. ADIs can make multiple drawings under the TFF up to the limit of their Funding Allowance.

  All TFF drawings were applied against the Initial Allowance until it was fully drawn or until the Initial Allowance drawdown window closed on 30 September 2020, whichever came first. All subsequent TFF drawings are applied against the Supplementary and Additional Allowances.

• New text was added to paragraphs in Section 8, which now reads:

  The Reserve Bank publishes data on aggregate usage of the TFF, on a weekly basis, and aggregate allowances on a monthly basis. The Reserve Bank will not publish institution-level data without consent, but there are no restrictions on ADIs publishing data on their own usage of the TFF.

Notice – 1 September 2020

The following amendments have been made to the TFF Operational Notes.

• New text was added to a paragraph in Section 1, which now reads:

  The Term Funding Facility to Support Lending to Australian Businesses (TFF) was announced on 19 March 2020 as part of a package of measures to support the Australian economy. The TFF was varied on 1 September 2020 to provide further support (see Market Announcement). Under the TFF, the Reserve Bank will offer three-year funding to authorised deposit-taking institutions (ADIs) through repurchase transactions at a fixed pricing rate of 25 basis points per annum.

• New text was added to a paragraph in Section 4.2, which now reads:

  When Eligible Securities are purchased by the Reserve Bank under a TFF Repo, the Reserve Bank will apply a margin ratio in order to obtain the ‘purchase price’ for the securities (see Margin Ratios for more details). The margin ratios applicable to TFF Repos are the same as applied to other repos conducted with the Reserve Bank as part of its domestic market operations.

• New text was added and existing text was amended in a paragraph in Section 5, which now reads:

  Participants in the TFF may access funding up to their Funding Allowance. To 30 September 2020, the Funding Allowance for each participant is equal to an Initial Allowance plus an Additional Allowance. From 1 October 2020 to 30 June 2021, the Funding Allowance is equal to the sum of any existing drawdowns against the Initial Allowance; a Supplementary Allowance; and an Additional Allowance.

• Some text was removed in a paragraph in Section 5.2, which now reads:

  The Reserve Bank will update the ADI's Additional Allowance on an ongoing basis as new data on outstanding business credit are submitted by the ADI. The Reserve Bank may adjust Additional Allowances to account for reclassifications between lending types. Following each data submission, the value of the Additional Allowance may increase or decrease depending on the change in the stock of Large Business and SME Credit Outstanding. The TFF Worked Examples illustrate the quantity of borrowing available in various scenarios.

• Some text was amended in a paragraph in Section 5.2, which now reads:

  For ADIs in Group A, the Additional Allowance is available for drawdown beginning on 6 April 2020. For ADIs in groups B and C, the Additional Allowance will become available following receipt and verification of the required data by the Reserve Bank, and no earlier than 6 April 2020. For all groups the Additional Allowance will be available for drawdown until 30 June 2021. To sustain access to the Additional Allowance until this time, ADIs in groups B and C must continue reporting the new data on outstanding business credit. Failure to continue reporting might result in early termination of existing TFF Repos.

• A new section, 5.3, was added:

  5.3 Supplementary Allowance

  The Supplementary Allowance is set at 2 per cent of a participant's Total Credit Outstanding to Australian resident households and (non-related) businesses; credit extended to non-residents is excluded. This calculation is made using data available to the Reserve Bank from existing ADI reports to APRA, as summarised in the below table:

  Group	Total Credit Outstanding is defined as:
  	APRA reporting item	Calculation	Collection
  A	ARF_720_1A/B BSAO27554(a)	Average of three months ending 31 July 2020	Existing
  B	ARF_720_1A/B BSAO27554(a)	Average of three months ending 31 July 2020	Existing
  C	ARF_323_0 BSAO11182(b)	Quarter ending 30 June 2020	Existing
  (a) See APRA PET (A or B) and Form Standard (b) See APRA PET and Form Standard

  The Supplementary Allowance is available for drawdown beginning on 1 October 2020. In order to access the Supplementary Allowance on 1 October 2020, ADIs must submit a TFF Repo Request by 12.00pm AEDT on Monday 28 September 2020. ADIs will be able to draw on their Supplementary Allowance from that date through to 30 June 2021.

• Consistent with the addition of Section 5.3, what was previously Section 5.3 is now Section 5.4, and what was previously Section 5.4 is now Section 5.5
• New text was added to a paragraph in Section 5.4 (following the new numbering outlined above), which now reads:

  There may be a period during which merging ADIs' access to new funding under the TFF is temporarily placed on hold until the Reserve Bank is able to confirm the merger details. Once those details are confirmed, the continuing ADI will regain access to the TFF to make further drawdowns of its existing Funding Allowance. The Reserve Bank will also notify the continuing ADI of a revised Funding Allowance and when it will become available; the continuing ADI will not receive an Additional Allowance for assets that are transferred (except as contemplated below). Merging ADIs will be required to enter a joint agreement with the Reserve Bank if the discontinuing ADI has drawn or intends to draw on the TFF before the merger date. Until this agreement is in place, the discontinuing ADIs' access to the TFF will be temporarily on hold.

• Text was amended in another paragraph in Section 5.4 (following the new numbering outlined above), which now reads:

  If the loan assets used in calculating the Funding Allowance of the discontinuing ADI are being fully transferred to the continuing ADI, the Funding Allowance of the continuing ADI will be from the Funding Allowance of the continuing and the discontinued ADI.

• New text was added to Section 6.2, which reads:

  On 1 September, as part of the ongoing notification letters sent to each eligible counterparty, the Reserve Bank notified the value available to them under their Supplementary Allowance from 1 October 2020.

• New text was added to a paragraph in Section 7.3, which now reads:

  All TFF drawings will be applied against the Initial Allowance until it is fully drawn or until the Initial Allowance drawdown window closes on 30 September 2020, whichever comes first. All subsequent TFF drawings will be applied against the Supplementary and Additional Allowances.

• Text was amended and new text was added to a paragraph in Section 7.7, which now reads:

  In the event that an ADI's Funding Allowance declines below the amount that the ADI has drawn under the TFF, the Reserve Bank will require the ADI to reduce the amount of funding they have drawn to (or below) the Funding Allowance. To do so, the Reserve Bank will inform the ADI in its Additional Allowance notification, and set out the process for the ADI to reduce the amount of their drawn TFF funding to no greater than their Funding Allowance.

• Text was amended in Section 8, which now reads:

  The Reserve Bank publishes data on aggregate usage of the TFF on a weekly basis, and aggregate allowances on a monthly basis. The Reserve Bank will not publish institution-level data, but there are no restrictions on ADIs publishing data on their own usage of the TFF.

Notice – 25 May 2020

New text has been added to section 5.2 of the TFF Operational Notes to clarify issues relating to Funding Allowances:

• The Reserve Bank may adjust Additional Allowances to account for reclassifications between lending types.

Notice – 21 April 2020

The following amendments have been made to the TFF Operational Notes to clarify issues relating to Funding Allowances:

• Worked examples that illustrate the quantity of borrowing available in various scenarios were added (see TFF Worked Examples).
• New text was added to section 5.2:
  To sustain access to the Additional Allowance until this time [31 March 2021], ADIs in groups B and C must continue reporting the new data on outstanding business credit. Failure to continue reporting might result in early termination of existing TFF Repos.
• A new section on Mergers and consolidations has been added:

  5.3 Mergers and Consolidations

  Under the RITS Regulations, ADIs are required to provide the RBA with prior written notice of any merger or consolidation: see clause 30.1(d). In addition, ADIs that intend to enter into a merger or consolidation in the period when the TFF is operational (and that have accessed or wish to access the TFF) should also provide prior written notice to the Reserve Bank by email to RBATFF@rba.gov.au and provide any information required by the Reserve Bank in respect of the merger of consolidation. In the case of a merger, this may include (to the extent relevant to the proposed merger):

  • the names of the continuing and discontinuing ADIs and expected merger date;
  • details on the share of the loans that were previously associated with the discontinuing ADI that will be transferred to the continuing ADI, and the expected date of transfer;
  • whether there will be any asset sales by the discontinuing ADI to a third party outside of the merging ADIs, and the expected date of sale; and
  • prompt notice of any likely restatements to relevant data previously reported to the Reserve Bank or APRA as a result of the merger.

  There may be a period during which merging ADIs' access to new funding under the TFF is temporarily placed on hold until the Reserve Bank is able to confirm the merger details. Once those details are confirmed, the continuing ADI will regain access to the TFF to make further drawdowns of its existing Funding Allowance. The Reserve Bank will also notify the continuing ADI of a revised Funding Allowance and when it will become available; the continuing ADI will not receive an Additional Allowance for assets that are transferred. Merging ADIs will be required to enter a joint agreement with the Reserve Bank if the discontinuing ADI has drawn or intends to draw on the TFF before the merger date. Until this agreement is in place, the discontinuing ADIs' access to the TFF will be temporarily on hold.

  If the loan assets used in calculating the Funding Allowance of the discontinuing ADI are being fully transferred to the continuing ADI, the Funding Allowance of the continuing ADI will be the sum of the Initial and Additional Allowances of the continuing and the discontinued ADI.

  If the loan assets used in calculating the Funding Allowance of the discontinuing ADI are only partially transferred to the continuing ADI, the continuing ADI will not receive the full Funding Allowance of the discontinuing ADI.

  From the merger date, the Additional Allowance of the continuing ADI will be equal to the sum of the Additional Allowances of the merging ADIs. The Additional Allowance of each merging ADI will be calculated separately. The Reserve Bank will do this by allocating changes in outstanding business credit for the merged ADI on a pro-rata basis to the stock of outstanding business credit of each of the merging ADIs from the merger date. The continuing ADI is required to report business credit data on a consolidated basis across the merging entities and is not required to report these data separately for the discontinuing ADI.

Notice – 14 April 2020

The following amendments have been made to the TFF Operational Notes to clarify certain aspects of the execution and settlement of TFF repos:

• A new section on Transaction Size and Rounding has been added:

  7.4 Transaction Size and Rounding

  The Reserve Bank will adjust transactions sizes to ensure that new transactions do not cause an ADI to exceed its Funding Allowance. If an ADI submits a TFF Repo Request with a requested transaction size (i.e. repo ‘Purchase Price’) greater than their unused Funding Allowance, then the Reserve Bank will notify the ADI and set the Purchase Price equal to the unused Funding Allowance when completing the trade.

  The final cash amount delivered will always be equal to or slightly lower than the requested transaction size, reflecting the minimum parcel size of the securities sold.

• A new section on Settlement Procedures has been added:

  7.5 Settlement Procedures

  Settlement of TFF Repos takes place within the Austraclear system (see Settlement Procedures for more details). Each leg of the repo will be settled as an outright transaction. A manual trade confirmation will be provided by email to confirm that the trade has been conducted as a repo.

Notice – 6 April 2020

An alternative method of calculating the Additional Allowances for the Term Funding Facility (TFF) has been introduced. The adoption of two methods ensures that all increases in lending to small and medium enterprises (SMEs) since February 2020 will count towards the Additional Allowance. This change will ensure that all Authorised Deposit Taking Institutions (ADIs) face strong incentives to extend credit to SMEs during this difficult period.

The contribution of SME Credit Outstanding to the Additional Allowance will now be calculated as the greater of:

• First method: five times the dollar increase in SME Credit Outstanding from the three months ending 31 January 2020 through to the three months ending 31 January 2021 (if there is a decline in SME Credit Outstanding, then this is zero); or
• Second method: five times the dollar increase in SME Credit Outstanding on 29 February 2020 through to the three months ending 31 January 2021 (if there is a decline in SME Credit Outstanding, then this is zero).

There is no change to the calculation of the Initial Allowance or the contribution of Large Business Credit Outstanding to the Additional allowance. Furthermore, the alternative approach does not affect any ADI's current Additional Allowances.

The Operational Notes have been adjusted to reflect this change.