In a speech published today, the bank's head of financial markets Vanessa Rayner says the size and composition of the Reserve Bank’s balance sheet had changed significantly in response to the Covid-19 pandemic.
Reflecting the improvement in financial market conditions, some of the liquidity facilities introduced by the Reserve Bank to keep cash flowing through the banking system were removed earlier this year.
“The removal of these temporary liquidity facilities should be taken as a sign of the collective success of the actions taken by global central banks as well as the resilience of commercial banks’ liquidity and funding positions prior to Covid-19,” Rayner says.
The actions taken over the past year mean the bank’s balance sheet will remain large for a long time, and new monetary policy tools will likely remain mainstream for as long as global central bank policy rates remain at, or near, record lows.
“Some of our assets from the Large Scale Asset Purchase programme have a maturity of up to 20 years in the future," Rayner says.
"Held to maturity, it would take decades for these assets to mature and roll off the balance sheet, irrespective of any reinvestment policy decisions.”
Innovation and evolution in the bank's balance sheet, currently sitting at $85 billion (see table below), will continue to support the bank’s monetary policy and financial stability objectives, including climate change, well into the future.
“When looking at the future of our balance sheet, it should come as no surprise that climate change and sustainable finance is at the forefront of our minds,” she says.
One way the bank can give effect to its climate change strategy is through the use of its balance sheet.
Rayner noted the Reserve Bank is considering how to incorporate sustainability objectives into its balance sheet operations.
There are several opportunities the bank will be exploring over the year ahead and learning from global central banking peers.