When most of us think about bank deposits, we picture our savings or term deposits. But there’s a hidden world where banks themselves become customers—lending and borrowing with each other through interbank deposits. In 2025, these transactions are more important than ever, underpinning everything from mortgage lending to crisis resilience. Let’s pull back the curtain on this vital pillar of Australia’s banking system.
What Are Interbank Deposits and Why Do They Matter?
Interbank deposits are short-term funds placed by one bank into another, usually to manage liquidity or meet regulatory requirements. Unlike retail deposits, these are typically large, overnight or short-term placements, and often move quietly between the biggest names in banking.
- Liquidity management: Banks use interbank deposits to ensure they have enough cash on hand to meet daily needs or sudden withdrawals.
- Settlement of payments: Banks settle transactions—think home loan drawdowns, business transfers, or government payments—using interbank accounts at the Reserve Bank of Australia (RBA).
- Interest rate benchmark: The rates banks charge each other for these deposits help set the benchmark for business and home loan rates across the economy.
For example, if Bank A receives a flood of deposits while Bank B faces a shortfall, Bank A might lend funds to Bank B overnight. These flows are the lifeblood of the financial system, keeping money moving and credit flowing.
2025 Policy Shifts: Regulation, Rates, and Risk
This year, Australia’s interbank deposit landscape is undergoing subtle but significant changes. Three key developments are shaping the sector in 2025:
- APRA’s updated liquidity coverage rules: The Australian Prudential Regulation Authority (APRA) has tightened the rules for how much high-quality liquid assets banks must hold, and how they can count interbank deposits toward these buffers. Banks now face stricter reporting and must discount certain interbank placements, nudging them toward more robust liquidity practices.
- RBA’s ‘corridor’ system tweaks: The Reserve Bank’s cash rate corridor, which influences how banks price overnight funds, has been narrowed. This means less room for banks to profit from small rate differences, and more pressure to manage liquidity efficiently.
- Real-time payments surge: The continued growth of the New Payments Platform (NPP) has increased the speed and volume of interbank settlements, requiring banks to be even more nimble in managing their daily liquidity positions.
These changes may sound technical, but they ripple through the system—affecting everything from term deposit rates for consumers to the stability of the banking sector during periods of stress.
How Interbank Deposits Affect Everyday Australians
While these transactions rarely make headlines, they matter for households and businesses. Here’s how:
- Interest rates: The cost of interbank borrowing feeds into the rates banks offer for home loans, business credit, and even savings products. When interbank rates spike, borrowing costs can rise across the board.
- Bank stability: Efficient interbank markets help banks absorb shocks—such as a sudden run on deposits—without freezing up lending or triggering broader panic.
- Innovation and competition: With faster settlements and more transparent liquidity requirements, smaller banks and fintechs can compete more effectively with the majors, potentially leading to better deals for customers.
For instance, during the brief volatility in March 2025—when offshore funding costs jumped due to global uncertainty—Australian banks leaned on domestic interbank deposits to maintain lending, cushioning the impact for mortgage holders and small businesses.
The Road Ahead: Will Interbank Deposits Stay Central?
Looking forward, interbank deposits are likely to remain essential, but the landscape will keep evolving. With the RBA exploring digital settlement tokens and APRA hinting at further liquidity reforms, banks must stay agile. The bottom line for Australians: a resilient, well-oiled interbank market means smoother payments, more stable interest rates, and a safer financial system—even if most of the action happens out of public view.
