The Australian Prudential Regulation Authority (APRA) has released its final guidance on contingent liquidity for locally incorporated authorised deposit-taking institutions (ADIs) with more than $1 billion in liabilities subject to APS 210 Minimum Liquidity Holdings (MLH) requirements.

The updated guidance has been implemented through an update to Prudential Practice Guide APG 210 Liquidity (APG 210) (new paragraphs 68 and 69).

The change reduces the level of self-securitised assets that APRA expects the MLH ADIs to hold to at least 10 per cent of an ADI’s total deposits and short-term wholesale liabilities, subject to an additional expectation that these ADIs will be able to increase holdings within a one-month timeframe in periods of stress.

APRA expects MLH ADIs to ensure they have the capacity including the operational capability to increase their self-securitisations to at least 20 per cent within one month, with this capability tested on a regular basis.

APRA says it would be prudent for MLH ADIs that do not have the capability to increase their self-securitised assets within one month to maintain a higher level of self-securitisation on an ongoing basis.

For MLH ADIs that are eligible to return to the 10 per cent level of self-securitisation, APRA would expect the guidance is met with unencumbered self-securitised assets that are not held as collateral for any other purpose.

MLH ADIs that are expected to maintain a higher level of self-securitisation may continue to include encumbered self-securitised assets pledged as collateral for RBA’s Term Funding Facility (TFF) to meet the guidance.

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