60 banks tap into RBA’s TFF

  • By Christine St Anne

To date, over 60 institutions have drawn on the Reserve Bank’s Term Funding Facility, with smaller institutions drawing a higher share of the funding available to them. 

Reserve Bank deputy governor Guy Debelle made this assessment at a speech to the Economic Society of Australia on Tuesday. 

The TFF was part of the four-pronged strategy by the bank as part of its COVID-19 support package

The initiative was aimed to provide cheaper funding for banks – at 25 basis points, compared to the 75 basis points cost to access funds. 

“We have seen the announcement of the TFF contribute to lower borrowing costs even though the total drawings by banks under the TFF have been modest to date relative to the size of the available funding,” Debelle said. 

However, he expects banks to increase their drawings in the coming months as banks use the TFF funds to replace maturing wholesale funding.

Debelle would not be drawn in regarding the outlook beyond the September cliff when government packages end, acknowledging that it will be a problem but that the government are also aware of the challenge and are working on what to do to address it.

He also expects higher level of insolvencies “to come” given the “size of the economic downturn”. 

However, he noted that both companies and banks are resilient to absorb the shock. 

“The corporate sector has come into this [health pandemic] with much less leverage. The banking system also has a much high level of capital which makes them more resilient to a downturn.”