What is the Liquidity Coverage Ratio (LCR) under APS 210?

The LCR requires ADIs to hold sufficient High Quality Liquid Assets (HQLA) to cover total net cash outflows over a 30-day stress scenario. APRA requires a minimum LCR of 100%, meaning the ADI must be able to survive a severe liquidity stress event for at least 30 calendar days.

What is the Net Stable Funding Ratio (NSFR)?

The NSFR measures whether an ADI has sufficient stable funding to support its assets and off-balance sheet activities over a one-year time horizon. The minimum requirement is 100%, ensuring that long-term assets are funded by stable, long-term liabilities rather than short-term wholesale funding.

Why does Australia have a Committed Liquidity Facility (CLF)?

Australia has a limited supply of government securities compared to other Basel III jurisdictions. The CLF, provided by the Reserve Bank of Australia, allows ADIs to count a committed facility from the RBA toward their HQLA for LCR purposes. APRA has been phasing down the CLF since 2022 as government bond supply has increased, with the CLF reducing to zero for major banks by January 2025.

What stress testing does APS 210 require for liquidity?

APS 210 requires ADIs to conduct regular liquidity stress tests covering institution-specific crises, market-wide crises, and combined scenarios. Stress tests must consider the impact on cash flows, HQLA availability, funding costs, and the ability to meet obligations without resorting to actions that would damage the ADI's reputation or viability.

What are the board's responsibilities under APS 210?

The board of an ADI must approve the liquidity risk management strategy and policies, set risk appetite and tolerance limits, receive regular reporting on liquidity positions and stress test results, and ensure adequate resources are allocated to liquidity risk management. The board must also approve the contingency funding plan.

APS 210 Liquidity Risk Guide: LCR, NSFR, and Contingency Funding for Australian ADIs

Updated March 2026 | 12 min read | By Pranjal

APRA Prudential Standard APS 210 (Liquidity) establishes the quantitative and qualitative requirements that authorised deposit-taking institutions must meet to manage liquidity risk. It implements the Basel III liquidity framework in Australia, with local adaptations reflecting the structure of Australian financial markets - most notably the Committed Liquidity Facility.

Liquidity risk - the risk that an ADI cannot meet its financial obligations as they fall due - was a central factor in the 2008 Global Financial Crisis. APS 210 exists to ensure that ADIs maintain enough liquid resources to survive severe stress events without requiring extraordinary public sector support.

Need a quick answer about APS 210 or liquidity requirements? Ask our AI compliance chatbot - it covers APRA prudential standards with clause references.

Liquidity Coverage Ratio (LCR)

The LCR is the primary short-term liquidity metric under APS 210. It measures whether an ADI holds enough high-quality liquid assets to cover net cash outflows during a 30-day stress scenario.

The LCR Formula

LCR = Stock of HQLA / Total Net Cash Outflows over 30 days >= 100%

APRA requires all LCR ADIs (those subject to the full quantitative framework) to maintain a minimum LCR of 100% at all times. This means the ADI must be able to self-fund through a severe but plausible liquidity stress lasting at least 30 calendar days.

HQLA Composition

High Quality Liquid Assets are classified into tiers based on their liquidity characteristics:

Level 1 HQLA - Cash, central bank reserves, Australian Government Securities (AGS), and semi-government securities rated AA- or above. No haircut applied. No cap on holdings.
Level 2A HQLA - Corporate bonds and covered bonds rated AA- or above. 15% haircut applied. Capped at 40% of total HQLA.
Level 2B HQLA - Lower-rated corporate bonds (A+ to BBB-), certain RMBS, and qualifying equities. 25-50% haircut. Capped at 15% of total HQLA.

For Australian ADIs, the limited supply of government bonds historically made it difficult to hold sufficient Level 1 HQLA, which led to the creation of the Committed Liquidity Facility.

Net Cash Outflow Assumptions

APS 210 prescribes specific run-off rates for different liability categories under the LCR stress scenario:

Stable retail deposits - 5% run-off rate (insured by FCS)
Less stable retail deposits - 10% run-off rate
Unsecured wholesale funding (operational) - 25% run-off rate
Unsecured wholesale funding (non-operational) - 40-100% run-off rate depending on counterparty
Secured funding backed by Level 1 HQLA - 0% run-off rate

Net Stable Funding Ratio (NSFR)

While the LCR addresses short-term liquidity resilience, the NSFR assesses structural funding stability over a one-year horizon. It became effective in Australia on 1 January 2018.

NSFR = Available Stable Funding (ASF) / Required Stable Funding (RSF) >= 100%

Available Stable Funding

ASF is determined by assigning stability factors to each funding source:

100% ASF - Tier 1 and Tier 2 capital, preferred stock with maturity >= 1 year, borrowings with residual maturity >= 1 year
95% ASF - Stable retail deposits (insured, established relationship)
90% ASF - Less stable retail deposits
50% ASF - Wholesale funding with residual maturity of 6-12 months
0% ASF - Wholesale funding with residual maturity less than 6 months, securities financing transactions

Required Stable Funding

Assets receive RSF factors reflecting how quickly they can be liquidated or how essential they are to hold:

0% RSF - Cash, short-term unsecured instruments, securities with remaining maturity under 1 year
5-15% RSF - Level 1 and Level 2A HQLA
50% RSF - Unencumbered residential mortgages with remaining maturity >= 1 year and risk weight <= 35%
65-85% RSF - Other loans to retail clients and small businesses
100% RSF - All other assets, non-performing loans, fixed assets, encumbered assets

The NSFR incentivises ADIs to fund long-term assets with stable, long-term liabilities rather than relying on short-term wholesale markets that can evaporate during a crisis.

The Committed Liquidity Facility (CLF)

The CLF is uniquely Australian. Unlike the US, UK, or Europe, Australia has a relatively small stock of government securities relative to the size of its banking system. This meant Australian ADIs could not realistically hold enough government bonds to meet LCR requirements through HQLA alone.

How the CLF Works

The Reserve Bank of Australia provides a committed facility that ADIs can count toward their LCR calculation. Key features:

The RBA commits to providing liquidity against eligible collateral (primarily self-securitised assets) during a stress event
ADIs pay a fee of 15 basis points per annum on the committed amount
The CLF amount is determined annually by APRA based on each ADI's demonstrated need
ADIs must first maximise their holdings of conventional HQLA before accessing the CLF

CLF Phase-Down

As Australian Government bond issuance increased significantly from 2020 onward (driven by pandemic fiscal response), APRA determined that the structural shortage of HQLA no longer applied. APRA commenced a phased reduction of CLF allocations:

2022 - CLF reduction began for the major banks
2024 - Further reductions as AGS supply continued to grow
January 2025 - CLF reduced to zero for major banks, requiring full HQLA compliance

Smaller ADIs may still access the CLF where they can demonstrate a genuine inability to source sufficient HQLA, but APRA's clear direction is toward full alignment with the international Basel III standard.

The CLF phase-down is one of the most significant changes to Australian bank liquidity management in a decade. ADIs that previously relied on the CLF must now hold substantially more government bonds and other HQLA. Ask our chatbot about the transition requirements.

Contingency Funding Plans

APS 210 requires every ADI to maintain a contingency funding plan (CFP) that sets out the strategies for addressing liquidity shortfalls in emergency situations. The CFP must be a practical, actionable document - not a compliance exercise.

CFP Requirements

Trigger framework - Define early warning indicators and escalation triggers (e.g., deposit outflow thresholds, credit rating downgrade, interbank market disruption)
Action plans - Specific actions for each severity level, including asset sales, collateral management, facility drawdowns, and communication strategies
Roles and responsibilities - Clear ownership of liquidity crisis management, including ALCO and board escalation procedures
Communication protocols - Plans for engaging with APRA, the RBA, counterparties, and depositors during a liquidity event
Regular testing - The CFP must be tested at least annually, with results reported to the board

Stress Testing Requirements

Beyond the prescribed LCR stress scenario, APS 210 requires ADIs to conduct their own internal liquidity stress tests covering multiple dimensions:

Scenario Types

Institution-specific stress - Scenarios where the ADI experiences a loss of confidence (credit rating downgrade, adverse media, operational failure) while broader markets function normally
Market-wide stress - Scenarios where funding markets seize up across the system (wholesale market closure, asset price declines, central bank intervention)
Combined stress - Simultaneous institution-specific and market-wide events, representing the most severe scenario

Stress Test Parameters

Internal stress tests must consider:

Run-off of retail and wholesale deposits at rates potentially exceeding Basel minimums
Reduced ability to access secured and unsecured funding markets
Increased haircuts on collateral and reduced market value of HQLA
Draw-down on committed facilities and contingent obligations
FX liquidity mismatches across currencies
Intraday liquidity requirements and payment system obligations

Board Oversight and Reporting

APS 210 places direct responsibility on the board for oversight of liquidity risk management:

Strategy approval - The board must approve the overall liquidity risk management strategy, including the risk appetite statement for liquidity risk
Policy framework - Board approval of liquidity policies, limits, and the contingency funding plan
Regular reporting - The board must receive regular reports on the ADI's liquidity position, LCR and NSFR levels, stress test results, and limit breaches
Senior management accountability - The board must ensure that senior management has the capability and resources to manage liquidity risk effectively
Independent review - Internal audit must periodically assess the liquidity risk management framework

Under the Financial Accountability Regime (FAR), specific accountable persons must be designated with responsibility for liquidity risk management, creating personal liability for failures in this area.

APRA Enforcement on Liquidity Management

APRA has demonstrated willingness to act on liquidity risk management failures:

Westpac (2020-2022) - While primarily an AML/CTF matter, APRA's $500 million capital adjustment included concerns about broader risk management governance, including liquidity risk oversight at the board and senior management level
Multiple ADIs (2023-2024) - APRA issued private supervisory actions to several ADIs over inadequate stress testing methodologies that failed to capture realistic scenario severity
CLF transition enforcement (2024-2025) - APRA closely supervised major banks' transition away from the CLF, requiring detailed transition plans and imposing additional reporting for those falling behind schedule

APRA's 2024 Supervision Priorities letter explicitly identified liquidity risk management as a key area of focus, noting that rising interest rates and shifting deposit behaviours (particularly the move from low-rate transaction accounts to higher-rate term deposits) created new liquidity dynamics that ADIs needed to manage.

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Practical Compliance Steps

HQLA portfolio review - Assess your current HQLA composition against LCR requirements, particularly if you previously relied on the CLF
NSFR structural assessment - Map your funding profile against the NSFR framework and identify any structural shortfalls
Stress test enhancement - Ensure internal stress tests go beyond Basel minimums and reflect institution-specific risk factors
CFP update - Review and test your contingency funding plan with realistic scenarios and clear escalation triggers
Board reporting upgrade - Enhance board liquidity reporting to include forward-looking metrics, not just point-in-time ratios
FAR mapping - Ensure accountable person responsibilities explicitly cover liquidity risk under the Financial Accountability Regime

Related Regulations

APS 210 intersects with several other prudential standards and regulatory requirements:

APS 110 (Capital Adequacy) - Capital and liquidity buffers must be considered together in stress scenarios
APS 117 (Interest Rate Risk) - Interest rate movements affect both asset values and funding costs
CPS 220 (Risk Management) - Liquidity risk must be integrated into the overall risk management framework
CPS 230 (Operational Risk) - Operational disruptions can trigger liquidity stress events
APS 330 (Public Disclosure) - LCR and NSFR are disclosed publicly under Pillar 3
Financial Accountability Regime - Personal accountability for liquidity risk management failures

Pranjal Founder of GoComply. Building AI-powered compliance tools for Australian financial services. GoComply scans policy documents against 100 regulatory rules across APRA, ASIC, AUSTRAC, and federal legislation.

This guide is for informational purposes and does not constitute legal or financial advice. Consult qualified compliance professionals for specific obligations. GoComply covers 106 Australian regulation sources with 110 compliance rules - try the chatbot for instant clause-level answers.