Australia Clarifies Liquid-Assets Definition

The Australian Prudential Regulation Authority has clarified the treatment of high-quality liquid assets toward meeting higher capital requirements adopted by the Basel Committee on Banking Supervision.

The Australian Prudential Regulation Authority has clarified the treatment of high-quality liquid assets toward meeting higher capital requirements adopted by the Basel Committee on Banking Supervision. APRA has created two categories of assets, with Level 1 consisting of cash, central bank reserves and “highest-quality sovereign or quasi-sovereign marketable instruments” that are of “undoubted liquidity, even during stressed market conditions.” Level 2 assets (which can make up no more than 40% of the total stock) are limited to certain other sovereign or quasi-sovereign marketable instruments, as well as certain types of corporate bonds and covered bonds, that also have a proven record as “a reliable source of liquidity even during stressed market conditions”. APRA said that at this point, “there are no assets that qualify as Level 2 assets.”

Click here to read the release from the Australian Prudential Regulation Authority.