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Connexus : Issue 36
The Basel Committee on Banking Supervision ended months of speculation when it released its final banking sector reform package, Basel III in December. On the liquidity side, little changed other than general recognition at global level that some countries may not be able to meet demand for level one high quality liquid assets (primarily sovereign debt) generated under the new liquidity coverage ratio to be introduced in 2015. For mutual ADIs, the Australian Prudential Regulation Authority is maintaining its line that the existing minimum liquidity holdings (MLH) regime will continue to apply. However, as we approach the next phase of consultations between APRA, the Reserve Bank of Australia and the banking sector, some questions remain unanswered: • Under the MLH regime, will the existing definition of high quality liquid assets (HQLA) change? • Will there be flow-on effects to smaller mutual ADIs from a narrower HQLA definition for larger ADIs? • Under the new framework, will APRA shift some of our larger mutuals up into the more rigorous stress-testing/ scenario analysis regime that applies to banks? Counting the cost The recently announced banking sector reform package from Basel raises liquidity issues that could affect some mutuals. By Daniel Newlan connexus www.abacus.org.au 17 17 connexus REGULATION www.abacus.org.au