Liquidity treatment of deposits placed with settlement service providers
To: All authorised deposit-taking institutions (ADIs) that are subject to the Minimum Liquidity Holdings (MLH) requirement
APRA is aware that MLH ADIs have adopted inconsistent liquidity treatment for deposits placed with settlement service providers. The purpose of this letter is to consult MLH ADIs on a draft FAQ to clarify the treatment and help ensure consistency between MLH ADIs (see Attachment A).
Consistent with Paragraph 2 of Prudential Standard APS 210 Liquidity (APS 210) Attachment B, components of deposits provided for the purpose of facilitating or securing settlement obligations that are encumbered should not be included as MLH liquid assets. Deposits placed with settlement service providers can be treated as MLH liquid assets where they are available for use by the ADI.
APRA acknowledges that historical communications provided to some ADIs has contributed to inconsistent treatment across the industry. This FAQ is intended to provide clarity and ensure consistency across MLH ADIs. This supersedes all previous APRA communications on the treatment of these deposits.
APRA welcomes feedback from MLH ADIs on the proposed FAQ. APRA is particularly interested in the impact of this clarification on entities and whether any additional guidance is required as well as the appropriateness of the proposed implementation timeframe.
We recognise that the impact of this clarification will vary across ADIs. Subject to feedback on this timing, APRA proposes that the relevant treatment should be reflected when ADIs submit their September 2026 quarterly liquidity reporting to APRA. Resubmission of historical liquidity reporting will not be required. Written submissions should be sent to liquidity@apra.gov.au by 24 April 2026. All information in submissions will be made available to the public on the APRA website unless a respondent expressly asks that all or part of the submission be kept confidential. APRA expects to publish the finalised FAQ and implementation timeline by 15 May 2026.
Yours sincerely
Ian Beckett
a/g Executive Director, Policy & Advice Division
Attachment A – Draft FAQ
Proposed Liquidity FAQ: Can MLH ADIs treat deposits placed with settlement service providers as MLH liquid assets?
Yes, provided the deposit is consistent with Paragraph 2 of APS 210 Attachment B, which states that MLH liquid assets “must be free from encumbrances”.
ADIs that use a third-party settlement service provider to make payments on their behalf are commonly required to maintain a minimum deposit with the settlement provider. The primary purpose of these deposits is to mitigate the settlement service provider’s credit exposure in the event of an ADI’s default, and the deposits may not be within the direct control of the ADI as a source of liquidity. Where this is the case, these deposits should not be included as MLH liquid assets.
Other unencumbered deposits that ADIs place with settlement service providers can be included as MLH liquid assets. This includes deposits used to secure overdraft facilities that can be drawn to provide liquidity within two business days, up to the facility limit.