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Reserve Bank of Australia

Reserve Bank of Australia. Kamran Mohtadi Central banking, liquidity crises and financial stability SS 2011 Lecturer: Dr. Ulrich Bindseil. Agenda. Introduction RBA‘s Implementation of Monetary policy Statistics. Introduction. A Brief History of Monetary Implementation in Australia

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Reserve Bank of Australia

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  1. Reserve Bank ofAustralia KamranMohtadi Central banking, liquidity crises and financial stability SS 2011 Lecturer: Dr. Ulrich Bindseil

  2. Agenda • Introduction • RBA‘s Implementation of Monetary policy • Statistics

  3. Introduction A Brief HistoryofMonetaryImplementation in Australia RBA‘s Market Operations

  4. A Brief History of Monetary Policy Implementation in Australia • 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

  5. Market Operations • 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

  6. RBA‘sImplementationofMonetarypolicy Open Market Operations Intra-dayLiquidityFacility OvernightLiquidityFacility Term Deposits AOFM Securities LendingFacility US Dollar Term Repo Operations

  7. Open Market Operations Operational target: The cash rate – The overnight interest rate on unsecured borrowings in the interbank market

  8. Open Market Operations • 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 Usedfor: • Transactions withtheGovernment : • GovernmentExpenditures • Federal Taxes • Commonwealth Government Securities (CGS) • Transactions Undertaken by the Banks With Other Finantial Institutions

  9. Open Market Operations • Outright Transactions & Repurchase Agreements • Until the middle of the 1980s  outright transactions in CGS • Through the 1990 Repurchase Agreements Source: http://www.rba.gov.au

  10. Open Market Operations • 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 Crisisand subsequent Relaxation ofRestrictions • Wider Range of Securities Issued by ADIs • Securities Backed by High-quality Residential Mortgages • Asset-backed Securities (ABS) • Residential Mortgage-backed Securities (RMBS)

  11. Source: http://www.rba.gov.au

  12. Open Market Operations • 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

  13. Intra-dayLiquidityFacility • Eligible ES accountholders • Repurchase Agreement WithEligible Securities • Repo Rate  0 % • Proceeds current market value of the securities

  14. OvernightLiquidityFacility • Eligible ES accountholders • Repurchase Agreement WithEligible Securities • Repo Rate  0.25 % over the current target for the cash rate • Proceeds current market value of the securities + profit

  15. Term Deposits • Short-termDeposit • Offered between September 2008 and April 2009 • Eligible ES accountholders • Tender Process

  16. AOFM Securities LendingFacility • On behalf of The Australian Office of Financial Management (AOFM) • Securities  Fixed Coupon Treasury Bonds • Securities not available from other Sources in the market

  17. US Dollar Term RepoOperations • Offered between September 2008 and February 2010 • US Dollar Liquidity Against Eligible Australian Dollar Securities as Collateral.

  18. Statistics Change in Cash Rate ES Balances Held at RBA Average Term of RBA Repos Dealt UsageofOvernight Standing Facility Reserve Bank Balance Sheet

  19. Change in Cash Rate Source: http://www.rba.gov.au

  20. ES Balances Held at RBA

  21. Average Term of RBA Repos Dealt

  22. UsageofOvernight Standing Facility

  23. Source: http://www.rba.gov.au

  24. Source: http://www.rba.gov.au

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