Managing the risks of holding self-securitisations as collateral

Managing the risks of holding self-securitisations as collateral

Managing the risks of holding self-securitisations as collateral

Sep 21 2020

The RBA recently released its September Bulletin which included an interesting article, Managing the risks of holding self-securitisations as collateral.

In a period where the future of the Committed Liquidity Facility (CLF) is being debated, the timing of this article is interesting to say the least and suggests that any demise in the use of self-securitisation is some way off. 

The RBA points out that this form of collateral can be used for the CLF (available self-securitisations could collateralise up to 90% of CLF limits), standing facility open repos and the Term Funding Facility (around 75% of TFF allowances could be collateralised by self-securitisation at this point), so there are various factors at play, and it also points out that self-securitisation is the most cost effective collateral available to banks (effectively unfunded liquidity). 

This type of collateral also forms a very significant component of collateral held under repo as per the charts below.  Finally, the RBA noted that self-securitisations are an integral part of the its "collateral framework” and “an effective way of enhancing overall financial system liquidity”, also noting that “A key component of the risk management process is the requirement by the Reserve Bank for issuers to submit detailed loan-level and deal-level data on a monthly basis.” 

Based on this commentary, it appears self-securitisation is here to stay for the time being (the TFF assured that in the short term), but the question remains, will it have a role in APRA's Liquidity Coverage Ratio (LCR)?

Download the article >