The Reserve Bank has released a consultation paper on possible changes to liquidity requirements for savings institutions and finance companies, in a bid to stop such institutions from failing.
The non-bank deposit takers consultation document on liquidity policy is the result of a law that came into force last year, which required all non-bank deposit takers to comply with a risk management plan, which includes procedures for managing liquidity risk.
The law also meant the regulations could specify liquidity requirements be included in trust deeds, and a number of other liquidity requirements relating to assets, liabilities, minimum liquid assets and cash flows.
The options identified in the consultation paper include roughly maintaining the status quo, prescribing a measurement framework with the companies themselves prescribing the quantitative requirements, or the Reserve Bank prescribing precise quantitative requirements against a risk management framework.
Submissions close on March 15.
