1 kamran mohtadi central banking, liquidity crises and financial stability ss 2011 lecturer: dr....
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1
Reserve Bank of Australia
Kamran MohtadiCentral banking, liquidity crises and financial stabilitySS 2011Lecturer: Dr. Ulrich Bindseil
2
Introduction
RBA‘s Implementation of Monetary policy
Statistics
Agenda
3
IntroductionA Brief History of Monetary Implementation in AustraliaRBA‘s Market Operations
4
Commonwealth Bank of Australia The Australian Notes Board & The First OMO
in Australia Creation of RBA in January1960 as a
separate central bank in Australia
A Brief History of Monetary Policy Implementation in Australia
5
Implementation of its monetary policy decisions operational target for monetary policy
Foreign Exchange Intervention Transactions in the Foreign Exchange
Market and in Foreign Asset Market Management of Australia’s International Reserves
Market Operations
6
RBA‘s Implementation of Monetary policy
Open Market OperationsIntra-day Liquidity FacilityOvernight Liquidity Facility Term Deposits AOFM Securities Lending FacilityUS Dollar Term Repo Operations
7
Operational target: The cash rate – The overnight interest rate on unsecured borrowings in the interbank market
Open Market Operations
8
Exchange Settlement (ES) Funds OMO determines the aggregate supply of ES
funds and are designed to ensure that supply equals demand at the target cash rate
ES Funds In Normal Times Used for: ◦ Transactions with the Government :
Government Expenditures Federal Taxes Commonwealth Government Securities (CGS)
◦ Transactions Undertaken by the Banks With Other Finantial Institutions
Open Market Operations
9
Outright Transactions & Repurchase Agreements Until the middle of the 1980s outright
transactions in CGS Through the 1990 Repurchase Agreements
Open Market Operations
Source: http://www.rba.gov.au
10
Australian dollar denominated securities acceptable for repurchase agreements since the mid 1990s ◦ Short-term Securities Rated A–1◦ Long-term Securities Rated AAA◦ Bills and Certificates of Deposit Issued by Authorised
Deposit-taking Institutions (ADIs) The Financial Crisis and subsequent Relaxation of
Restrictions ◦ Wider Range of Securities Issued by ADIs◦ Securities Backed by High-quality Residential Mortgages◦ Asset-backed Securities (ABS)◦ Residential Mortgage-backed Securities (RMBS)
Open Market Operations
11Source: http://www.rba.gov.au
12
13
Prior to the crisis The longest Term for Repos was three months
In the second half of 2007 six-month and one-year repos.
open market operations with foreign exchange swaps during the crisis
Open Market Operations
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Eligible ES account holders Repurchase Agreement With Eligible
Securities Repo Rate 0 % Proceeds current market value of the
securities
Intra-day Liquidity Facility
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Eligible ES account holders Repurchase Agreement With Eligible
Securities Repo Rate 0.25 % over the current target
for the cash rate Proceeds current market value of the
securities + profit
Overnight Liquidity Facility
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Short-term Deposit Offered between September 2008 and April
2009 Eligible ES account holders Tender Process
Term Deposits
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On behalf of The Australian Office of Financial Management (AOFM)
Securities Fixed Coupon Treasury Bonds Securities not available from other Sources
in the market
AOFM Securities Lending Facility
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Offered between September 2008 and February 2010
US Dollar Liquidity Against Eligible Australian Dollar Securities as Collateral.
US Dollar Term RepoOperations
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StatisticsChange in Cash RateES Balances Held at RBA Average Term of RBA Repos DealtUsage of Overnight Standing FacilityReserve Bank Balance Sheet
20
01-A
ug-1
990
01-Ju
l-199
1
01-Ju
n-19
92
01-M
ay-1
993
01-A
pr-1
994
01-M
ar-1
995
01-F
eb-1
996
01-Ja
n-19
97
01-D
ec-1
997
01-N
ov-1
998
01-O
ct-1
999
01-S
ep-2
000
01-A
ug-2
001
01-Ju
l-200
2
01-Ju
n-20
03
01-M
ay-2
004
01-A
pr-2
005
01-M
ar-2
006
01-F
eb-2
007
01-Ja
n-20
08
01-D
ec-2
008
01-N
ov-2
009
01-O
ct-2
010
-2.00
0
+2.00
+4.00
+6.00
+8.00
+10.00
+12.00
+14.00
+16.00
-0,50 -1.00 to -1.5016.50 to 17.00 15.00 to 15.50
Change in Cash Rate
Source: http://www.rba.gov.au
21
ES Balances Held at RBA
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Average Term of RBA Repos Dealt
23
Usage of Overnight Standing Facility
24Source: http://www.rba.gov.au
25
Source:http://www.rba.gov.au