Home Markets RBA’s $5b fund is for ‘double-black swan’ events

RBA’s $5b fund is for ‘double-black swan’ events

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Both the RBA and the Australian Securities and Investments Commission will get stronger supervisory and licensing powers, the budget papers say.

The budget papers give no estimates for the cost of the new powers, saying their nature means there is no reliable way forecast the expense.

ASX chief risk officer Hamish Treleaven welcomed the “sensible” measures and said such a resolution fund would only be used in the most rare, high-profile instances of financial institution collapses.

“It would have to be a double-black swan event,” Mr Treleaven said.

The ASX’s clearing house function acts as a promoter of financial stability. The ASX mitigates credit risk by standing in the middle of every transaction to intermediate the risk between trading counter-parties and acts as a shock absorber in times of financial stress.

Should a very large global banking institutional default, and if they are a member of the ASX clearing house, financial markets may…

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