Bendigo Bank’s liquidity position received a boost on Wednesday after the Australian Prudential Regulation Authority lifted special measures that increased the company’s minimum liquidity requirement three years ago. In October 2020 APRA imposed a ten per cent overlay to the net cash outflow component for calculating Bendigo’s liquidity coverage ratio. The measure was imposed on the bank after it self-reported breaches of liquidity standards relating to the classification of some retail deposits. While the incorrect deposit classifications did not alter the overall soundness of Bendigo’s liquidity position at the time, APRA found that they constituted “material” breaches of liquidity management rules. The effect of the special overlay since 2020 has been to raise the minimum liquidity obligation of the bank. In a statement filed to the ASX on Wednesday, Bendigo indicated that the removal of the special regulatory measure would boost the bank’s liquidity coverage ratio by up to 12 per cent. Australia’s largest banks are required to maintain liquidity coverage ratios to at least 100 per cent, but the industry average is around 120 per cent. Bendigo’s LCR at the end of March was among the most robust in the sector at 139 per cent, but could rise to above 150 per cent at the end of September because of APRA’s decision to remove the overlay. Liquidity management has become a more important feature of prudential supervision in the last decade as bank regulators have focused on the ability of banks to convert assets into cash to cover extreme demand from depositors during financial crises. The removal of the overlay comes after Bendigo was also directed by APRA to appoint an independent expert to review its liquidity management practices. The review’s findings provided a basis for developing a remediation plan to address the bank’s historical compliance weaknesses.