New liquidity rules could cost borrowers

The Australian Prudential and Regulation Authority’s (APRA) new liquidity rules could add 0.05 of a percentage point to borrowing rates.

According to a report in The Australian Financial Review, the proposed rules have been modelled off a similar British reform, which caused the small cost to be imposed on UK banks.

APRA has said it wants to avoid a repeat of the liquidity crisis that occurred in late 2008 when banks could not fund their balance sheet commitments.

Under the new rules, banks would be forced to hold larger quantities of liquid assets and a higher quality of liquid assets.

“The world needs strict and precise timetables for imposing tougher regulations because the forces of amnesia and resistance to change that will inevitably accompany the return to calmer global conditions may soon begin to chip away at fundamental reforms,” APRA chairman John Laker said in a speech last week.

The Australian Prudential and Regulation Authority’s (APRA) new liquidity rules could add 0.05 of a percentage point to borrowing rates.

According to a report in The Australian Financial Review, the proposed rules have been modelled off a similar British reform, which caused the small cost to be imposed on UK banks.

APRA has said it wants to avoid a repeat of the liquidity crisis that occurred in late 2008 when banks could not fund their balance sheet commitments.

Under the new rules, banks would be forced to hold larger quantities of liquid assets and a higher quality of liquid assets.

“The world needs strict and precise timetables for imposing tougher regulations because the forces of amnesia and resistance to change that will inevitably accompany the return to calmer global conditions may soon begin to chip away at fundamental reforms,” APRA chairman John Laker said in a speech last week.

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