Reserve Bank of Australia expands eligibility of corporate debt as collateral

To assist with the smooth functioning of Australian capital markets, the Reserve Bank has broadened the range of corporate debt securities that are eligible as collateral for domestic market operations to investment grade.

The minimum criteria for unsubordinated debt securities issued in Australian dollars by corporations that are not authorised deposit-taking institutions (ADIs) (hereafter referred to as corporate debt securities) is now an average credit rating of investment grade. This also applies to debt securities issued by entities established under an Australian Government, state or territory law without an explicit Australian Government guarantee.

For long-term corporate debt securities, the minimum criteria corresponds to an average credit rating of BBB-. For short-term corporate debt securities the minimum criteria corresponds to an average credit rating of A-3. Previously, the minimum requirements for repo eligibility were an average credit rating of AAA for long-term corporate securities and A-1 for short-term corporate securities.

The eligibility of corporate debt securities for purchase by the Reserve Bank under a repurchase agreement (repo) remains subject to an approval process, as with all securities except Australian Government and semi government securities. For more information on the criteria established by the Reserve Bank to determine whether securities are eligible and how to apply, see Eligible Securities.

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