Banks hoard record $7.6b at RBA

Australian banks were holding a record $7.56 billion on deposit at the central bank  as of September 26 as financial institutions hoard cash worldwide amid a credit squeeze.

The Reserve Bank of Australia added $2.72 billion to the financial system today, leaving the estimated cash surplus at $424 million, according to the central bank's Web site. Banks on Sept. 26 had added $143 million to their exchange settlement accounts.

Australian banks' borrowing costs retreated today from the highest since Bear Stearns Cos. collapsed six months ago, according to a gauge that measures the availability of funds in the market.

The difference between the rate banks charge each other for three-month loans and the overnight indexed swap rate dropped to 86.75 basis points, or 0.8675 percentage point, at 10:01 a.m. in Sydney, from 91 basis points on Sept. 26, when it reached 98.5 basis points, Bloomberg data show. The gap has averaged 45 basis points this year.

Exchange settlement accounts are on-call deposits at the Reserve Bank that receive interest at 0.25% percentage point below the central bank's benchmark rate. Central bank Governor Glenn Stevens lowered the central bank's cash target rate to 7% on Sept. 2.

Bloomberg News