The Australian Prudential Regulation Authority has finalised an FAQ for authorised deposit-taking institutions subject to the Minimum Liquidity Holdings requirement, clarifying how deposits placed with settlement service providers should be treated under Prudential Standard APS 210 Liquidity. Deposits used to facilitate or secure settlement obligations must not be counted as MLH liquid assets where they are encumbered, while deposits with settlement service providers can be included if they are unencumbered and remain within the control of the ADI. The clarification follows consultation launched on 2 April, which drew three submissions. Respondents argued that security deposits with settlement service providers should not be treated as encumbered because they support short-term settlement needs, but APRA concluded they cannot be relied on in a stress scenario if they remain under the provider’s control. The final FAQ also states that other unencumbered deposits with settlement service providers may qualify as MLH liquid assets, including deposits securing overdraft facilities that can be drawn within two business days, up to the facility limit. APRA has extended the transition period to 31 December 2026 for materially affected entities. The revised treatment is expected to be reflected in ADIs' December 2026 quarterly liquidity reporting, and historical reports will not need to be resubmitted.

Original source Back to tracker