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‘Watertight’ funding requirement sees Aussie banks named and shamed

By Grace Ormsby · July 25 2019
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John Lonsdale

‘Watertight’ funding requirement sees Aussie banks named and shamed

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By Grace Ormsby · July 25 2019
Reading:
egg
egg
John Lonsdale

Three Australian banks have been criticised for calling their intra-group funding arrangements “stable” despite having agreements in place that have the potential to undermine each ADI’s ability to weather financial stress.

Macquarie Bank, Rabobank Australia and HSBC Bank have all been called out by APRA for being in breach of the prudential liquidity standard.

A review from the authority found the banks were “improperly reporting the stability of the funding they received from other entities within the group”.

It was said that the banks had provisions in their funding agreements that would potentially allow the group funding to be withdrawn in a stress scenario, “undermining the stability of the Australian bank”.

Commenting on the breaches, APRA’s deputy chair John Lonsdale said, “Macquarie Bank, Rabobank Australia and HSBC Australia are financially sound, with strong liquidity and funding positions in the current stable environment.”

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“However, to ensure they would be able to withstand a scenario of financial stress, group funding agreements for Australian banks must be watertight, so they can be relied on when they would be most needed,” he added.

APRA said it now requires these banks to strengthen their intra-group agreements to ensure term funding can’t be withdrawn in financial stress scenarios.

The banks must also restate past funding and liquidity ratios where they were reported incorrectly to provide transparency for investors and the community, a statement explained.

The authority said that supervisors are now considering a range of further options for regulation of the banks in breach, and may impose higher funding and liquidity requirements on all three ADIs.

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‘Watertight’ funding requirement sees Aussie banks named and shamed
John Lonsdale
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About the author

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

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About the author

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

Join The Nest Egg community

We Translate Complicated Financial Jargon Into Easy-To-Understand Information For Australians

Your email address will be shared with nestegg and subject to our Privacy Policy

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