Reserve Bank of Australia
After hopefully overcoming the worst of the COVID-19 pandemic, the Australian securitisation industry is taking stock of a period of resilience and a reshaped competitive landscape. Top of mind for market participants are the way crisis response has changed the cost of funding unevenly for different issuer types and mooted changes to responsible-lending rules.
The Reserve Bank of Australia (RBA) and Reserve Bank of New Zealand (RBNZ) used their respective November monetary-policy decisions to roll out a raft of additional support measures for economies in the earliest stages of recovery. There are reasons for optimism – including a receding prospect of negative rates in New Zealand.
As widely expected, the Reserve Bank of Australia (RBA) used its 3 November statement on monetary policy to unveil a clutch of new measures designed to support Australia’s economic recovery, including a cash-rate ‘micro cut’ and A$100 billion (US$70.5 billion) of additional government-sector bond purchases. At the same time, the statement delivered a relatively positive view on the economic trajectory.
On 7 October, following the announcement of the Australian federal government budget, the Australian Office of Financial Management (AOFM) revealed an expected funding requirement of around A$240 billion (US$170.5 billion) for the 2020/21 financial year. The announcement was no surprise to market watchers, but some analysts expect the Reserve Bank of Australia (RBA) may need to step up its market intervention.
Authorised deposit-taking institutions (ADIs) picked up their usage of the Reserve Bank of Australia (RBA)’s term funding facility (TFF) before its cut-off date on 30 September, eventually subscribing for almost all their original allowance. While the RBA says the scheme is achieving its goal at least some market participants are concerned about its distortionary effect.
While Australia is not facing the same compulsion as other global markets to drop its credit reference rate – in this case the bank-bill swap rate (BBSW) – there is still growing reason for market participants to understand, and start using, alternative reference rates (ARRs). Commonwealth Bank of Australia (CBA) took a leadership position in 2019 by pricing a securitisation deal linked to Australian overnight index average (AONIA). The bank convened a roundtable with KangaNews to discuss the next phase of evolution.