APRA has announced its approach to implementation in Australia of the Basel Committee on Banking Supervision’s new global framework for promoting stronger liquidity buffers at internationally active banking institutions.

The centrepiece of this framework is a new standard for liquidity risk that aims to ensure that banking institutions have sufficient high-quality liquid assets to survive an acute stress scenario lasting for one month. The standard will come into effect on 1 January 2015.

APRA will consult with the larger ADIs (around 40 in number) on the new Liquidity Coverage Ratio (LCR) requirement.

APRA does not intend to apply the LCR requirement to ADIs that are currently subject to a simple quantitative metric, the minimum liquid holdings (MLH) regime. In APRA’s view, the MLH regime is working effectively in delivering an appropriate degree of resilience for ADIs with simple, retail-based business models. Accordingly, APRA intends to retain the current approach for these ADIs.