Financial Sector (Collection of Data) (reporting standard) determination No. 63 of 2008
Reporting Standard GRS 130.1 (2008) Off Balance Sheet Business – Liquidity Support Facilities Obtained
Financial Sector (Collection of Data) Act 2001
I, Charles Watts Littrell, a delegate of APRA, under paragraph 13(1)(a) of the Financial Sector (Collection of Data) Act 2001 (the Act) and subsection 33(3) of the Acts Interpretation Act 1901:
· REVOKE Reporting Standard GRS 130.1 (2007) Off Balance Sheet Business – Liquidity Support Facilities Obtained which is in force as at the date of this determination (the old standard); and
· DETERMINE Reporting Standard GRS 130.1 (2008) Off Balance Sheet Business – Liquidity Support Facilities Obtained in the form set out in the Schedule (the new standard), which applies to the financial sector entities referred to in paragraph 2 of the new standard.
Under section 15 of the Act, I DECLARE that the new standard shall begin to apply, and the old standard shall cease to apply, on the date of registration of this instrument on the Federal Register of Legislative Instruments.
Dated 16 October 2008
[Signed]
Charles Littrell
Executive General Manager
Policy, Research and Statistics
Interpretation
In this Determination
APRA means the Australian Prudential Regulation Authority.
Federal Register of Legislative Instruments means the register established under section 20 of the Legislative Instruments Act 2003.
Schedule
Reporting Standard GRS 130.1 (2008) Off Balance Sheet Business – Liquidity Support Facilities Obtained comprises the 13 pages commencing on the next page.
Reporting Standard GRS 130.1 (2008)
Off Balance Sheet Business – Liquidity Support Facilities Obtained
Objective of this reporting standard
This reporting standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001 (the Collection of Data Act). It requires general insurers (insurers), including foreign general insurers (foreign insurers) operating in Australia through branch operations, to report to APRA, generally on a quarterly and annual basis, their off balance sheet exposures in the form of liquidity support facilities.
This reporting standard outlines the overall requirements for the provision of this information to APRA. It should be read in conjunction with:
· Form GRF 130.1 Off Balance Sheet Business – Liquidity Support Facilities Obtained (Form GRF 130.1) and the associated instructions (which are attached and form part of this reporting standard); and
· any prudential standards referenced in the attached instructions.
Purpose
1. Data collected in Form GRF 130.1 is used by APRA for the purpose of prudential supervision including assessing an insurer’s compliance with the capital standards.
Application and commencement
2. This reporting standard applies to all insurers for reporting periods commencing on or after 1 July 2008.
Information required
3. An insurer must provide APRA with the information required by Form GRF 130.1 for each reporting period.
Forms and method of submission
4. The information required by this reporting standard must be given to APRA either:
(a) in electronic form using the ‘Direct to APRA’ application, applying one of the electronic submission mechanisms under that application; or
(b) by manually completing Form GRF 130.1 on paper and mailing the completed form to APRA’s head office at Level 26, 400 George Street, Sydney, New South Wales.
Note: the Direct to APRA application software and paper forms may be obtained from APRA.
Reporting periods and due dates
5. Subject to paragraph 6, an insurer must provide the information required by this reporting standard:
(a) in respect of each quarter based on the financial year (within the meaning of the Corporations Act 2001) of the insurer; and
(b) in respect of each financial year (within the meaning of the Corporations Act 2001) of the insurer.
Note: The annual information required by paragraph 3 read with subparagraph 5(b), together with certain annual information required by other reporting standards, will form part of the insurer’s yearly statutory accounts within the meaning of section 3 of the Insurance Act 1973 (the Insurance Act). This means that the information must be audited in accordance with paragraph 49J(1)(a) of the Insurance Act. Under subsection 49J(3), the auditor must give the insurer a certificate relating to the yearly statutory accounts, and that certificate must specify the matters provided for in the prudential standards.
6. APRA may, by notice in writing, change the reporting periods, or specified reporting periods, for a particular insurer to require it to provide the information:
(a) more frequently (if, having regard to the particular circumstances of the insurer, APRA considers it necessary or desirable to obtain information more frequently for the purposes of the prudential supervision of the insurer); or
(b) less frequently (if, having regard to the particular circumstances of the insurer and the extent to which it requires prudential supervision, APRA considers it unnecessary to require the insurer to provide the information as frequently as provided by subparagraph 5(a) or (b)).
7. The information required by paragraph 3 of this reporting standard from an insurer must be provided to APRA by the following times:
(a) in the case of the quarterly information required by subparagraph 5(a) – 20 business days after the end of the reporting period to which the information relates; and
(b) in the case of the annual information required by subparagraph 5(b) – 4 months after the end of the reporting period to which the information relates.
Note: Paragraph 49L(1)(a) of the Insurance Act provides that the auditor’s certificate required under subsection 49J(3) of that Act must be lodged with APRA in accordance with the prudential standards. The prudential standards provide that the certificate must be submitted to APRA together with the yearly statutory accounts. Accordingly, the auditor’s certificate in relation to the annual information required by paragraph 3 read with subparagraph 5(b) must be provided to APRA by the time specified in subparagraph 7(b) of this reporting standard (unless an extension is granted under paragraph 8).
8. APRA may grant an insurer an extension of a due date in writing, in which case the new due date for the provision of the information will be the date on the notice of extension.
Quality control
9. The information provided by an insurer under this reporting standard must be the product of processes and controls that have been reviewed and tested by the appointed auditor of the insurer. This will require the auditor to review and test the systems, processes and controls supporting the reporting of the information to ensure that they produce accurate data and are otherwise reliable. This review and testing must be done on an annual basis or more frequently if necessary to enable the appointed auditor to form an opinion on the accuracy and reliability of the data.
10. The information provided by an insurer under this reporting standard must be subject to processes and controls developed by the insurer for the internal review and authorisation of that information. It is the responsibility of the board and senior management of the insurer to ensure that an appropriate set of policies and procedures for the authorisation of data submitted to APRA is in place.
Authorisation
11. If the officer of an insurer provides the information required by this reporting standard:
(a) under subparagraph 4(a), the officer must digitally sign, authorise and encrypt the information (for which purpose APRA’s certificate authority will issue digital certificates, for use with the ‘Direct to APRA’ application, to officers of the insurer who have authority from the insurer to transmit data to APRA); or
(b) under subparagraph 4(b), the completed form must be signed in accordance with paragraph 13.
12. If an insurer provides the information required by this reporting standard through an agent under either subparagraph 4(a) or (b), the agent will not be required to sign or authorise the information. However, the insurer must:
(a) obtain from the agent a paper copy of the completed form as provided to APRA (whether it was provided under subparagraph 4(a) or (b)); and
(b) cause the paper copy to be signed in accordance with paragraph 13; and
(c) lodge the signed paper copy with APRA by mailing the completed form to APRA’s head office at Level 26, 400 George Street, Sydney, New South Wales, by the relevant due date (unless APRA, in writing, waives the requirement to lodge the signed paper copy with APRA by varying this reporting standard in relation to the insurer).
Note: APRA may, for example, determine to waive the requirement under subparagraph 12(c) where an insurer has undertaken to retain the signed copy of the completed form for an agreed period of time.
13. If information under this reporting standard is provided in paper form, it must be signed on the front page of the relevant completed form by either:
(c) the Principal Executive Officer of the insurer; or
(d) the Chief Financial Officer of the insurer (whatever his or her official title may be).
Minor alterations to forms and instructions
14. APRA may make minor variations to the instructions to a form, to clarify their application to the form without changing any substantive requirement in the form or instructions.
15. If APRA makes such a variation it must notify insurers in writing.
Transition
16. An insurer must report in relation to a reporting period ending prior to 1 July 2008 in accordance with the reporting standard that this reporting standard replaced.
Interpretation
17. In this reporting standard:
appointed auditor means an auditor appointed under paragraph 39(1)(a) of the Insurance Act;
business days means ordinary business days, exclusive of Saturdays, Sundays and public holidays;
capital standards means the prudential standards which relate to capital adequacy as defined in Prudential Standard GPS 001 Definitions;
foreign insurer means a foreign general insurer within the meaning of the Insurance Act;
Note: A reference to a ‘branch’ or ‘branch operation’ is a reference to the Australian operations of a foreign insurer.
Insurance Act means the Insurance Act 1973;
insurer means a general insurer within the meaning of the Insurance Act;
Note: In the forms and instructions, a reference to an ‘authorised insurer’, ‘authorised insurance entity’ or ‘licensed insurer’ is a reference to an insurer, and a reference to an ‘authorised reinsurance entity’ is a reference to an insurer whose business consists only of undertaking liability by way of reinsurance.
Principal Executive Officer means the principal executive officer of the insurer for the time being, by whatever name called, and whether or not he or she is a member of the governing board of the insurer;
reporting period means a period mentioned in subparagraph 5(a) or (b) or, if applicable, paragraph 6.
A reference to a prudential standard means the prudential standard, made under section 32 of the Insurance Act, mentioned in the reference, as amended from time to time. If the prudential standard has been revoked and replaced, the reference shall be taken to be to the prudential standard that has replaced it
Reporting Form GRF 130.1
Off-Balance Sheet Business - Liquidity Support Facilities Obtained
Instruction Guide
Introduction
This form collects information on an insurer’s (reinsurer’s) off-balance sheet liquidity arrangements.
Audit requirements
The form relating to authorised insurance entities and reinsurance entities is required to be subject to audit review and testing.
The scope and nature of audit testing required is outlined in the applicable Auditing and Assurance Guidance Statement issued by the Auditing and Assurance Standards Board.
Information provided in the form in respect of a financial year of an insurer forms part of the insurer’s ‘yearly statutory accounts’ within the meaning of section 3 of the Insurance Act 1973. This means that:
· the completed form for the financial year must be audited by the Appointed Auditor of the insurer (see paragraph 49J(1)(a) of the Act);
· the insurer must make such arrangements as to enable the auditor to do this (subsection 49J(2));
· the auditor must give the insurer a certificate relating to the completed form (and other completed forms that are part of the insurer’s yearly statutory accounts), which must contain statements of the auditor’s opinion on the matters required by the prudential standards to be dealt with in the certificate (subsection 49J(3));
· the certificate must be lodged with APRA as provided for in the prudential standards (paragraph 49L(1)(a)), namely by the due date for lodging the form in respect of the financial year for the insurer.
Reporting entity
Forms are to be completed for the following reporting entities only where required:
1. Branch insurers of a foreign parent insurer (reference to licensed insurer in the form means total operations of the branch, excluding the parent operations);
2. Authorised insurance entities, including mutual entities (reference to licensed insurer in the form means total operations of the licensed entity); and
3. Authorised reinsurance entities (reference to licensed insurer in the form means total operations of the licensed entity).
Unit of measurement
Amounts denominated in foreign currency are to be converted to AUD in accordance with AASB 121 ‘The Effects of Changes in Foreign Exchange Rates’.
The general requirements of AASB 121 ‘The Effects of Changes in Foreign Exchange Rates’ for translation are:
1. Foreign currency monetary items[1] outstanding at the reporting date must be translated at the spot rate[2] at the reporting date.
2. Foreign currency non-monetary items[3] that are measured at historical cost in a foreign currency must be translated using the exchange rate at the date of the transaction.
3. Foreign currency non-monetary items that are measured at fair value will be translated at the exchange rate at the date when fair value was determined.
Transactions arising under foreign currency derivative contracts at the reporting date must be prepared in accordance with AASB 139 ‘Financial Instruments: Recognition and Measurement’. However, those foreign currency derivatives that are not within the scope of AASB 139 ‘Financial Instruments: Recognition and Measurement’ (eg some foreign currency derivatives that are embedded in other contracts) remain within the scope of AASB 121 ‘The Effects of Changes in Foreign Exchange Rates’.
For APRA purposes equity items must be translated using the foreign currency exchange rate at the date of investment or acquisition. Post acquisition changes in equity are required to be translated on the date of the movement.
As foreign currency derivatives are measured at fair value, the currency derivative contracts are translated at the spot rate at the reporting date.
Exchange differences should be recognised in profit and loss in the period which they arise. For foreign currency derivatives, the exchange differences would be recognised immediately in profit and loss if the hedging instrument is a fair value hedge. For derivatives used in a cash flow hedge, the exchange differences should be recognised directly in equity.
The ineffective portion of the exchange differences in all hedges would be recognised in profit and loss.
4. Translation of financial reports of foreign operations.
A foreign operation is defined in AASB 121 ‘The Effects of Changes in Foreign Exchange Rates’ as meaning an entity that is a subsidiary, associate, joint venture or branch of a reporting entity, the activities of which are based or conducted in a country or currency other than those of the reporting entity.
· Exchange differences relating to foreign currency monetary items that form part of the net investment of an entity in a foreign operation, must be recognised as a separate component of equity.
· Translation of financial reports should otherwise follow the requirements in AASB 121 ‘The Effects of Changes in Foreign Exchange Rates’.
Reporting period
Insurers are required to report the information in the reporting form on a quarterly and annual basis.
· The quarterly information is to be completed in respect of each quarter based on the financial year of the insurer, not the calendar year.
· The annual information is to be completed in respect of the financial year of the insurer.
· The financial information requested in this form is to be reported as at the last day of the reporting period on a financial year to date basis of the insurer.
Reporting lag
This form must be lodged for each of the reporting units within the number of business days after the end of the quarter as set out in Reporting Standard GRS 130.1 Off Balance Sheet Business – Liquidity Support Facilities Obtained.
Related party disclosure
For the purposes of this form, related bodies corporate are to be interpreted consistently with the meaning as in AASB 124 ‘Related Party Disclosures’.
In accordance with AASB 124, related party means a party that directly or indirectly through one or more intermediaries:
(a) controls, is controlled by or is under common control with, the entity (this includes parents, subsidiaries and fellow subsidiaries);
(b) has significant influence over the entity or has joint control over the entity; or
(c) is an associate (as defined in AASB 128 ‘Investments in Associates’) of the entity; or
(d) is a joint venture in which the entity is a venturer (see AASB 131 ‘Interests in Joint Ventures’); or
(e) is a member of the key management personnel of the entity or its parent; or
(f) is a close member of the family of any individual referred to in (a), (b) or (e); or
(g) is an entity that its controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (e) or in (f); or
(h) is a post-employment benefit plan for the benefit of the employees of the entity, or of any entity that is a related party of the entity.
Specific instructions
This section captures information on liquidity support facilities contracted by the insurer (reinsurer) to supplement its liquidity management practices.
Approved Balance Available
Report the total approved balance of the facility.
Undrawn Balance Available
Report the balance of the facility that has not been used or drawn-down by the insurer at the reporting date.
Standby facilities
These facilities are approved and committed to the insurer. These generally require written notice by the insurer to trigger draw down (access) to the funds.
Facilities with same day drawdown
Report those standby facilities that are able to be drawn down (funds accessed) the same day as notice is given by the insurer of its intention to draw down on the standby facility.
Facilities with 2-5 day drawdown
Report those standby facilities that are able to be drawn down (funds accessed) within 2-5 days after notice from the insurer is given of its intention to draw down on the standby facility (i.e. a 2-5 day waiting period).
Facilities with greater than 5 days drawdown
Report those standby facilities that are only able to be drawn down (funds accessed) 5 days after notice from the insurer is given of its intention to draw down (i.e. a 5 day waiting period).
Bill Acceptance/Discount Facilities
These are another form of liquidity/funding. The funding is provided to the insurer by a facility that discounts bills (e.g. bank accepted bills). Principal and interest (discount) owing on the bill is repaid or ‘rolled over’ by the insurer on maturity of the bill.
Letter of Credit Facilities
Report the Letter of Credit facilities available to the insurer.
Overdrafts
Report the overdrafts facilities available to the insurer.
Other liquidity support facilities
Report all other off-balance sheet liquidity support facilities contracted by the insurer which are not included in the categories above.
Total OBS liquidity support facilities
Do not enter values. This amount is automatically calculated by the form.
Total Liquidity Support Facilities Which Are With Related Entities
Report liquidity support facilities that are provided by related entities of the insurer (e.g. parent entity of the insurer or a related entity of the parent entity).
[1] Monetary items are defined to mean units of currency held and assets and liabilities to be received or paid in a fixed or determinable number of units of currency.
[2] Spot rate means the exchange rate for immediate delivery.
[3] Examples of non-monetary items include amounts prepaid for goods and services (e.g. prepaid rent); goodwill; intangible assets; physical assets; and provisions that are to be settled by the delivery of a non-monetary asset.
