APRA APS 210 Liquidity: LCR, NSFR and the MLH regime

Prudential Standard APS 210 Liquidity is the Australian Prudential Regulation Authority's (APRA) core liquidity standard for authorised deposit-taking institutions (ADIs). It requires every ADI to hold enough high-quality liquid assets and stable funding to survive a period of liquidity stress, and it sorts ADIs into two regimes: the more advanced Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) framework, and the simpler Minimum Liquidity Holdings (MLH) regime. If you searched for "aps210", this is the standard that governs how a bank, building society or credit union measures and manages its liquidity risk.

This article explains who APS 210 applies to, the substance of the two regimes, the key ratios and timing, and the practical steps to stay compliant. It is a neutral reference; always confirm the current standard text and any figures with APRA.

What APS 210 requires

At its heart, APS 210 obliges an ADI to maintain a sound liquidity risk management framework and to hold a sufficient buffer of liquid assets and stable funding so it can meet obligations as they fall due, including under stress.

The standard does three main things:

• It sets quantitative liquidity requirements (the LCR, NSFR and MLH ratios, depending on the ADI's category).
• It requires a board-approved liquidity risk management framework, including a liquidity risk appetite, contingency funding plan and stress testing.
• It gives APRA the power to impose higher or institution-specific requirements where it has concerns about an ADI's liquidity profile or risk management.

The full text sits in the APRA Prudential Handbook entry for APS 210, and the accompanying guidance is in Prudential Practice Guide APG 210 Liquidity.

Who APS 210 applies to

APS 210 applies to all ADIs authorised under the Banking Act 1959 — banks, building societies and credit unions — though the specific obligations scale with the size and complexity of the institution.

Broadly, ADIs fall into two groups:

• LCR ADIs — larger, more complex banks that APRA has designated as subject to the LCR and (where locally incorporated) the NSFR.
• MLH ADIs — generally smaller, less complex ADIs that meet their quantitative liquidity requirement through the Minimum Liquidity Holdings regime instead.

Foreign ADIs (branches of overseas banks operating in Australia) are subject to the standard with modifications that reflect group-level liquidity support. The precise designation of any given ADI is a matter for APRA, so an institution should confirm its category directly rather than assume it.

The two regimes: LCR/NSFR and MLH

The split between the two regimes is the defining feature of APS 210.

LCR (Liquidity Coverage Ratio) is a short-term measure. It tests whether an ADI holds enough high-quality liquid assets (HQLA) to cover its total net cash outflows over a 30 calendar-day stress scenario. The scenario applies prescribed run-off and inflow assumptions to deposits, wholesale funding and other exposures.

NSFR (Net Stable Funding Ratio) is a structural, longer-term measure. It addresses funding risk over a one-year horizon by requiring an ADI to fund its activities with sufficiently stable sources of funding, reducing reliance on short-term wholesale markets. APRA introduced the NSFR into APS 210 through a revised standard incorporating the NSFR for LCR ADIs.

MLH (Minimum Liquidity Holdings) is the simpler alternative for less complex ADIs. Rather than the detailed cash-flow modelling of the LCR, an MLH ADI must hold a minimum percentage of its liabilities in specified high-quality liquid assets, managed to cover both short and longer periods of stress.

Key ratios, thresholds and timing

The headline quantitative requirements are:

• An LCR ADI must maintain an LCR of at least 100 per cent on an ongoing basis (with provisions allowing the buffer to be drawn down in a genuine stress event).
• A locally incorporated LCR ADI must maintain an NSFR of at least 100 per cent at all times.
• An MLH ADI must hold a minimum proportion of its liabilities in eligible liquid assets — confirm the current MLH percentage with APRA, as the exact figure and the list of eligible assets are set in the standard.

Importantly, these are floors, not targets. APRA expects ADIs to operate with a prudent surplus above the minimum and may require an MLH ADI to hold higher minimum liquidity if it has concerns about the institution's liquidity risk profile or the quality of its risk management. Liquidity positions must be monitored continuously, with formal reporting to APRA on the prescribed cycle. ADIs should not state any specific percentage, run-off rate or reporting date from memory — verify each against the current APS 210 text.

Governance, reporting and the link to risk management

APS 210 is not only about ratios. It requires the board and senior management to own the liquidity risk framework, including:

• A documented liquidity risk appetite and limits aligned with the ADI's business model.
• Regular liquidity stress testing across a range of scenarios, including institution-specific and market-wide stresses.
• A contingency funding plan setting out actions and funding sources for a liquidity crisis.
• Robust measurement, monitoring and management information systems.

This framework does not sit in isolation. It connects directly to APRA's overarching risk management requirements in CPS 220 Risk Management, which sets the expectations for the institution-wide risk management framework, the risk appetite statement and board oversight that APS 210's liquidity requirements plug into. For broader context on APRA-regulated obligations, see the financial services topic hub.

ADIs report their liquidity positions to APRA through the prudential reporting framework on a regular basis, and must notify APRA promptly if they breach, or expect to breach, a minimum requirement.

How to comply with APS 210

Practical steps for an ADI to demonstrate compliance:

• Confirm your category. Establish with APRA whether you are an LCR ADI or an MLH ADI, as this determines which ratios apply.
• Embed the ratios in daily operations. Calculate the applicable ratio (LCR, NSFR or MLH) on the required frequency and maintain a prudent buffer above the minimum.
• Maintain a board-approved framework. Keep the liquidity risk appetite, limits, contingency funding plan and stress-testing program current and approved at board level.
• Stress test regularly. Run scenarios that reflect both idiosyncratic and systemic shocks, and feed results into limits and the funding plan.
• Report accurately and on time. Meet the prudential reporting obligations and notify APRA of any actual or anticipated breach.
• Document everything. Keep evidence of governance decisions, model assumptions and validation so the framework withstands APRA review.

Common pitfalls

• Treating the minimum as the target. A ratio that sits exactly at 100 per cent leaves no room to absorb stress and signals weak management; APRA expects a managed surplus.
• Stale assumptions. Using outdated run-off rates, deposit categorisations or eligible-asset lists. The standard's parameters change over time — always work from the current APS 210 text.
• Weak contingency planning. A contingency funding plan that is never tested or updated is of little value in an actual crisis.
• Disconnected governance. Running liquidity management separately from the broader risk framework, rather than integrating it with CPS 220.
• Misclassifying assets or funding. Counting assets as HQLA, or funding as "stable", when they do not meet the standard's definitions.
• Late breach notification. Failing to tell APRA promptly when a minimum is breached or likely to be breached.

Because APS 210's specific thresholds, run-off assumptions and reporting cycles are set in the standard and updated periodically, treat any figure in a general explainer as indicative and confirm the operative numbers in the current standard and reporting instructions before relying on them.