SYDNEY, Sept 8 (Reuters) - Australian banks will be required
to buy up to A$240 billion ($175 billion) of new government debt
to boost emergency liquidity levels, which will also cut
government borrowing costs and help fund coronavirus stimulus
spending, the Australian Financial Review reported on Tuesday.
Bank executives have been in talks with industry regulator
the Australian Prudential Regulation Authority (APRA) about the
planned bank liquidity rule change, which is expected to be
unveiled after the federal budget in October, the newspaper
The main purpose of the move would be to "enhance bank
stability in line with international rules so banks continue to
withstand periods of financial stress", the newspaper said,
without identifying its sources.
But a secondary goal would be to lower government interest
rates "as banks buy more government bonds instead of holding
private sector bank bonds and residential mortgage backed
securities", the article added.
The Reserve Bank of Australia (RBA) last week said it would
increase the size of its term funding facility to around A$200
billion at a fixed rate of 25 basis points for three years.
Banks will be able to draw up on this extra funding up until
the end of June 2021.
The RBA launched an "unlimited" bond buying programme in
March and has since bought A$66 billion of government
Local banks have been big buyers of public debt during the
pandemic, adding to the 20% of federal government bonds and
almost 50% of state government debt they held before the
COVID-19 crisis hit Australia.
An RBA spokeswoman directed a Reuters inquiry to APRA, which
declined to comment.
Representatives of Commonwealth Bank of Australia,
Westpac Banking Corp and Australia and New Zealand
Banking Group Ltd - the country's largest, second
largest and fourth largest lenders - were also not immediately
available for comment.
A spokesman for No. 3 lender National Australia Bank Ltd
declined to comment.
($1 = 1.3738 Australian dollars)
(Reporting by Renju Jose and Byron Kaye; Editing by Jane