Financial Sector (Collection of Data) (reporting standard) determination No. 10 of 2006 Reporting standard ARS 221.0 Large Exposures 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 the Reporting Standard ARS 221.0 (2005) Large Exposures; and · DETERMINE the Reporting standard ARS 221.0 Large Exposures in the form set out in the Schedule, which applies to the financial sector entities referred to in paragraph 2 of the reporting standard. Under section 15 of the Act, I DECLARE that the reporting standard shall begin to apply to those financial sector entities on the later of 1 July 2006 and the date of registration on the Federal Register of Legislative Instruments. Dated 26 June 2006 [signed] Charles Littrell Executive General Manager Policy, Research and Statistics APRA
Interpretation In this Determination APRA means the Australian Prudential Regulation Authority.
Schedule Reporting standard ARS 210.0 Statement of High Quality Liquid Assets Calculation (Licensed ADI) comprises 39 pages commencing on the next page.
Reporting Standard ARS 221.0
Large Exposures
Objective of this reporting standard
This reporting standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001. It requires all authorised deposit-taking institutions, including foreign authorised deposit-taking institutions operating in Australia through branch operations, to report to APRA, generally on a quarterly basis, in relation to their large exposures. This reporting standard outlines the overall requirements for the provision of relevant information to APRA. It should be read in conjunction with the versions of Form ARF 221.0 Large Exposures designated for a ‘Licensed ADI’ and ‘Consolidated Group’, and the associated instructions (all of which are attached and form part of this reporting standard).
Purpose
1. Data collected in Form ARF 221.0 Large Exposures (Form ARF 221.0) is used by APRA for the purpose of prudential supervision. It may also be used by the Reserve Bank of Australia and the Australian Bureau of Statistics.
Application
2. This reporting standard applies to all authorised deposit-taking institutions (ADIs).
Information required
3. An ADI must provide APRA with the information required by the version of Form ARF 221.0 designated for a ‘Licensed ADI’ for each reporting period. 4. An ADI that is the highest parent entity in relation to a consolidated ADI group must provide APRA with the information required by the version of Form ARF 221.0 designated for a ‘Consolidated Group’ for each reporting period.
Forms and method of submission
5. The information required by this reporting standard must be given to APRA either: (a) in electronic form, using one of the electronic submission mechanisms provided by the ‘Direct to APRA’ (also known as ‘D2A’) application; or (b) manually completed on paper, which must be faxed or mailed to APRA’s head office. Note: the Direct to APRA application software and paper forms may be obtained from APRA.
Reporting periods and due dates
6. Subject to paragraph 7, an ADI must provide the information required by this reporting standard for each quarter based on the financial year (within the meaning of the Corporations Act 2001) of the ADI. 7. APRA may, by notice in writing, change the reporting periods, or specified reporting periods, for a particular ADI, to require it to provide the information required by this reporting standard more frequently, or less frequently, having regard to: (a) the particular circumstances of the ADI; (b) the extent to which the information is required for the purposes of the prudential supervision of the ADI; and (c) the requirements of the Reserve Bank of Australia or the Australian Bureau of Statistics. 8. The information required by this reporting standard must be provided to APRA by the following times: (a) in the case of the information required by paragraphs 3 and 4 from a locally-incorporated bank, locally-incorporated special service provider or foreign ADI (other than a specialist credit card institution) – 20 business days after the end of the reporting period to which the information relates; and (b) in the case of the information required by paragraphs 3 and 4 from a locally- incorporated credit union, locally-incorporated building society, specialist credit card institution (whether locally-incorporated or not) or Cairns Penny Savings & Loans Limited – 15 business days after the end of the reporting period to which the information relates. 9. APRA may grant an ADI 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
10. The information provided by an ADI under this reporting standard (except for the information required under paragraph 4) must be the product of processes and controls that have been reviewed and tested by the external auditor of the ADI. AGS 1008 ‘Audit Implications of Prudential Reporting Requirements for Authorised Deposit-taking Institutions’, issued by the Auditing and Assurance Standards Board provides guidance on the scope and nature of the review and testing required from external auditors. This review and testing must be done on an annual basis or more frequently if necessary to enable the external auditor to form an opinion on the accuracy and reliability of the data. 11. All information provided by an ADI under this reporting standard must be subject to processes and controls developed by the ADI for the internal review and authorisation of that information. It is the responsibility of the board and senior management of the ADI to ensure that an appropriate set of policies and procedures for the authorisation of data submitted to APRA is in place.
Authorisation
12. If an ADI submits information under this reporting standard using the ‘Direct to APRA’ software, it will be necessary for an officer of the ADI to digitally sign, authorise and encrypt the relevant data. For this purpose, APRA’s certificate authority will issue ‘digital certificates’, for use with the software, to officers of the ADI who have authority from the ADI to transmit the data to APRA. 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: (a) the Principal Executive Officer of the ADI; or (b) the Chief Financial Officer of the ADI (whatever his or her official title may be).
Minor alterations to forms and instructions
14. APRA may make minor variations to: (a) a form that is part of this reporting standard, and the instructions to such a form, to correct technical, programming or logical errors, inconsistencies or anomalies; or (b) 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 in writing each ADI that is required to report under this reporting standard.
Transitional
16. An ADI must report under the old reporting standard in respect of a transitional reporting period. For these purposes: old reporting standard means the reporting standard revoked in the determination making this reporting standard (being the reporting standard which this reporting standard replaces). transitional reporting period means a reporting period under the old reporting standard: (a) which ended before the date of revocation of the old reporting standard; and (b) in relation to which the ADI was required, under the old reporting standard, to report by a date on or after the date of revocation of the old reporting standard.
Interpretation - classifications of ADIs
17. In this reporting standard: Accounting Standard AASB 127 means the accounting standard so made by the Australian Accounting Standards Board. ADI means an authorised deposit-taking institution within the meaning of the Banking Act 1959. ADI list means the attached ADI list. building society means an ADI whose name appears under the heading ‘Building Societies’ in the ADI list. consolidated ADI group means a group comprising: (a) an ADI that is a highest parent entity; and (b) each subsidiary (within the meaning of Accounting Standard AASB 127) of that ADI, whether the subsidiary is locally-incorporated or not, other than a subsidiary that is excluded by the instructions attached to this standard. credit union means an ADI whose name appears under the heading ‘Credit Unions’ in the ADI list. foreign ADI means an ADI that is not incorporated in Australia. highest parent entity means an ADI that satisfies all of the following conditions: (a) it is locally-incorporated; (b) it has at least one subsidiary (within the meaning of Accounting Standard AASB 127); and (c) it is not itself a subsidiary (within the meaning of Accounting Standard AASB 127) of an ADI that is locally-incorporated. locally-incorporated means incorporated in Australia. locally-incorporated bank means an ADI whose name appears under the heading ‘Australian-owned Banks’ or ‘Foreign Subsidiary Banks’ in the ADI list. special service provider means an ADI whose name appears under the heading ‘Other ADIs’ in the ADI list (other than Cairns Penny Savings & Loans Limited). specialist credit card institution means an ADI whose name appears under the heading ‘Specialist Credit Card Institutions (SCCIs)’ in the ADI list. 18. If an ADI is not in the ADI list, then: (a) if the ADI assumes or uses the word ‘bank’ in relation to its financial business, and is locally-incorporated, it is taken to be a locally-incorporated bank for the purposes of this reporting standard; (b) if the ADI assumes or uses the expression ‘building society’ in relation to its financial business, and is locally-incorporated, it is taken to be a locally-incorporated building society for the purposes of this reporting standard; (c) if the ADI assumes or uses the expression ‘credit union’, ‘credit society’ or ‘credit co-operative’ in relation to its financial business, and is locally-incorporated, it is taken to be a credit union for the purposes of this reporting standard; (d) if an ADI engages in credit card issuing or credit card acquiring, or both, and does not otherwise carry on banking business within the meaning of section 5 of the Banking Act 1959, it is taken to be a specialist credit card institution for the purposes of this reporting standard. 19. APRA may in writing determine that an ADI is taken to be a locally-incorporated bank, locally-incorporated building society, locally-incorporated credit union, specialist credit card institution or locally-incorporated special service provider for the purposes of this reporting standard (even if, under paragraph 17 or 18, it comes within a different classification).
Interpretation - other definitions
20. In this reporting standard: business days means ordinary business days, exclusive of Saturdays, Sundays and public holidays. Principal Executive Officer means the principal executive officer of the ADI for the time being, by whatever name called, and whether or not he or she is a member of the governing board of the entity. reporting period means a reporting period under paragraph 6 or, if applicable, paragraph 7.
The ADI list
Australian-owned Banks
· Adelaide Bank Limited · AMP Bank Limited · Australia and New Zealand Banking Group Limited · Bank of Queensland Limited · Bendigo Bank Limited · Commonwealth Bank of Australia · Commonwealth Development Bank of Australia Limited (a subsidiary of Commonwealth Bank of Australia) · Elders Rural Bank Limited · Macquarie Bank Limited · Members Equity Bank Pty Limited · National Australia Bank Limited · St George Bank Limited · Suncorp-Metway Limited · Westpac Banking Corporation
Foreign Subsidiary Banks
· Arab Bank Australia Limited · Bank of China (Australia) Limited · Bank of Cyprus Australia Pty Limited · BankWest (the trading name of Bank of Western Australia Limited, a foreign subsidiary bank following its sale to Bank of Scotland in December 1995) · Citigroup Pty Limited · HSBC Bank Australia Limited · ING Bank (Australia) Limited · Investec Bank (Australia) Limited · Laiki Bank (Australia) Limited · NM Rothschild & Sons (Australia) Limited · Rabobank Australia Limited (a subsidiary of Rabobank Nederland from October 1994)
Branches of Foreign Banks
· ABN AMRO Bank N.V. · Bank of America, National Association · Bank of China (subject to depositor protection provisions of the Banking Act 1959) · Bank of Tokyo-Mitsubishi UFJ, Ltd · Barclays Capital (the trading name of Barclays Bank plc) · BNP Paribas · Citibank N.A. · Credit Suisse · Deutsche Bank AG · HBOS Treasury Services plc · HSBC Bank plc · ING Bank NV · JPMorgan Chase Bank, National Association · Mizuho Corporate Bank, Ltd · Oversea-Chinese Banking Corporation Limited · Rabobank Nederland (the trading name of Co-operative Central Raiffeisen-Boerenleenbank B.A.) · Royal Bank of Canada · Société Générale · Standard Chartered Bank · State Bank of India · State Street Bank and Trust Company · The International Commercial Bank of China · The Royal Bank of Scotland Plc · The Toronto-Dominion Bank · Taiwan Business Bank · UBS AG · United Overseas Bank Limited · WestLB AG
Building Societies
· ABS Building Society Ltd · B & E Ltd · Greater Building Society Ltd · Heritage Building Society Limited · Home Building Society Ltd · Hume Building Society Ltd · IMB Ltd · Lifeplan Australia Building Society Limited · Mackay Permanent Building Society Ltd · Maitland Mutual Building Society Limited · Newcastle Permanent Building Society Ltd · Pioneer Permanent Building Society Limited · The Rock Building Society Limited · Wide Bay Australia Ltd
Credit Unions
· Alliance One Credit Union Ltd · AMP Employees' & Agents Credit Union Limited · Austral Credit Union Limited · Australian Central Credit Union Limited · Australian Country Credit Union Ltd (trading as Reliance Credit Union) · Australian Defence Credit Union Ltd · AWA Credit Union Limited · Bananacoast Community Credit Union Ltd · Bankstown City Credit Union Ltd · Berrima District Credit Union Ltd · Big Sky Credit Union Ltd · Blue Mountains and Riverlands Community Credit Union Ltd · Broadway Credit Union Ltd · Calare Credit Union Ltd · CAPE Credit Union Limited · Capital Credit Union Ltd · Capricornia Credit Union Ltd · Carboy (SA) Credit Union Limited · Central Murray Credit Union Limited · Central West Credit Union Limited · Circle Credit Co-operative Limited · Coastline Credit Union Limited · Collie Miners Credit Union Ltd · Community Alliance Credit Union Limited · Community CPS Australia Limited · Community First Credit Union Limited · Companion Credit Union Limited · Comtax Credit Union Limited · Connect Credit Union of Tasmania Limited · Country First Credit Union Ltd · CPS Credit Union Co-operative (ACT) Limited · Credit Union Australia Ltd · Credit Union Incitec Pivot Limited · Croatian Community Credit Union Limited · CSR and Rinker Employees Credit Union Limited · Dairy Farmers Credit Union Ltd · Defence Force Credit Union Limited · Discovery Credit Union Ltd · Dnister Ukrainian Credit Co-operative Limited · ELCOM Credit Union Ltd · Electricity Credit Union Ltd · Encompass Credit Union Limited · Ericsson Employees Credit Co-operative Limited · Esso Employees' Credit Union Ltd · Eurobodalla Credit Union Ltd · Family First Credit Union Limited · Fire Brigades Employees' Credit Union Limited · Fire Service Credit Union Limited · Firefighters & Affiliates Credit Co-operative Limited · First Option Credit Union Limited · First Pacific Credit Union Limited · Fitzroy & Carlton Community Credit Co-operative Limited · Ford Co-operative Credit Society Limited · Gateway Credit Union Ltd · Geelong & District Credit Co-operative Society Limited · GMH (Employees) Q.W.L. Credit Co-operative Limited · Goldfields Credit Union Ltd · Gosford City Credit Union Ltd · Goulburn Murray Credit Union Co-operative Limited · H.M.C. Staff Credit Union Ltd · Heritage Isle Credit Union Limited · Hibernian Credit Union Limited · Holiday Coast Credit Union Ltd · Horizon Credit Union Ltd · Hoverla Ukrainian Credit Co-operative Ltd · Hunter Mutual Limited · Hunter United Employees' Credit Union Limited · Industries Mutual Credit Union Limited · Intech Credit Union Limited · Island State Credit Union Ltd · Karpaty Ukrainian Credit Union Limited · La Trobe Country Credit Co-operative Limited · La Trobe University Credit Union Co-operative Limited · Laboratories Credit Union Ltd · Latvian Australian Credit Co-operative Society Limited · Lithuanian Co-operative Society (Talka) Limited · Lysaght Credit Union Ltd · MacArthur Credit Union Ltd · Macaulay Community Credit Co-operative Limited · Macquarie Credit Union Limited · Maleny and District Community Credit Union Limited · Manly Warringah Credit Union Ltd · Maritime Workers of Australia Credit Union Ltd · Maroondah Credit Union Ltd · MECU Limited · Melbourne University Credit Union Limited · Memberfirst Credit Union Limited · New England Credit Union Ltd · Newcom Colliery Employees' Credit Union Ltd · Northern Inland Credit Union Ltd · Nova Credit Union Limited · NSW Teachers Credit Union Ltd · Old Gold Credit Union Co-operative Limited · Orana Credit Union Ltd · Orange Credit Union Limited · Phoenix (NSW) Credit Union Ltd · Plenty Credit Co-operative Limited · Police & Nurses Credit Society Limited · Police Association Credit Co-operative Limited · Police Credit Union Limited · Polish Community Credit Union Ltd · Power Credit Union Limited · Powerstate Credit Union Ltd · Pulse Credit Union Limited · Qantas Staff Credit Union Limited · Queensland Community Credit Union Limited · Queensland Country Credit Union Ltd · Queensland Police Credit Union Limited · Queensland Professional Credit Union Ltd · Queensland Teachers' Credit Union Limited · Queenslanders Credit Union Limited · Railways Credit Union Limited · RegionalOne Credit Union Limited · Resources Credit Union Limited · RTA Staff Credit Union Limited · Satisfac Direct Credit Union Limited · Savings and Loans Credit Union (S.A.) Ltd · Security Credit Union Ltd · Select Credit Union Ltd · Service One Credit Union Ltd · SGE Credit Union Limited · Shell Employees' Credit Union Limited · South West Slopes Credit Union Ltd · Southern Cross Credit Union Limited · South-West Credit Union Co-operative Limited · St Mary's Swan Hill Co-operative Credit Society Limited · St Patrick's Mentone Co-operative Credit Society Limited · Statewest Credit Society Limited · Sutherland Credit Union Ltd · Sutherland Shire Council Employees' Credit Union Ltd · Sydney Credit Union Ltd · Tartan Credit Union Ltd · The Broken Hill Community Credit Union Ltd · The Gympie Credit Union Ltd · The Police Department Employees' Credit Union Limited · The Summerland Credit Union Limited · The TAFE and Community Credit Union Limited · The University Credit Society Limited · Traditional Credit Union Limited · TransComm Credit Co-operative Limited · Uni Credit Union Ltd · United Credit Union Limited · Victoria Teachers Credit Union Limited · Wagga Mutual Credit Union Ltd · Warwick Credit Union Ltd · WAW Credit Union Co-operative Limited · Westax Credit Society Ltd · Western City Credit Union Ltd · Woolworths/Safeway Employees' Credit Co-operative Limited · Wyong Council Credit Union Ltd · Yennora Credit Union Ltd
Specialist Credit Card Institutions (SCCIs)
Foreign-owned SCCIs · GE Capital Finance Australia · GE Finance Australasia Pty Ltd Locally Incorporated SCCIs · MoneySwitch Limited
Other ADIs
These companies are run by industry bodies and provide services (eg payments clearing) to member building societies and credit unions. · Australian Settlements Limited · Credit Union Services Corporation (Australia) Limited · Indue Ltd One ADI that provides general banking services which does not fall into the other categories. · Cairns Penny Savings & Loans Limited
Authorised Non-Operating Holding Companies
· HBOS Australia Pty Ltd
Reporting Form ARF 221.0 Large Exposures
Instruction Guide
Purpose This form collects information on an authorised deposit-taking institution’s (ADI’s) large exposures to an individual counterparty or a group of related counterparties at the stand-alone and consolidated banking group level. Information reported on this form is prudentially important, as it will form part of APRA’s monitoring and analysis framework for the ADI and the industry. Note: Do not include an ADI’s exposures to related entities (defined in accordance with Prudential Standard APS 222 Associations with Related Entities (APS 222)) in this form. Such exposures are to be reported in ARF 222.0 Exposures to Related Entities.
Audit requirements
This form is subject to audit review and testing. The scope and nature of audit testing required is outlined in the applicable Audit Guidance Statement issued by the Auditing and Assurance Board of the Australian Accounting Research Foundation. General directions and notes
Reporting entity
1. Licensed ADI The Licensed ADI form is to be completed by all ADIs at Level 1 (i.e. the stand-alone level) defined in accordance with Prudential Standard APS 110 Capital Adequacy (APS 110). Foreign ADIs[1] and Specialist Credit Card Institutions (SCCIs) operating through branches in Australia are required to complete this form for the Australian branch only. Securitisation deconsolidation principle Except where stated otherwise on this form, reporting entities must treat any securitisation program special purpose vehicles (SPVs) in which the ADI (or a member of its consolidated group) participates in accordance with APRA’s clean sale and separation requirements as non-consolidated independent third parties. As a result, for reporting purposes all assets, liabilities, revenues and expenses of these SPVs must be excluded from the ADI’s reported amounts. Where relevant, report on this form any exposure to or other transaction between the ADI and any such SPV as if such transaction was conducted with an independent third party, regardless of whether the SPV or its assets is consolidated for accounting purposes.
APRA's clean sale and separation requirements are set out in APS 120 Funds Management and Securitisation and related Guidance Notes AGN 120.3 Purchase and Supply of Assets (including Securities Issued by SPVs) and AGN 120.1 Disclosure and Separation. Whenever the clean sale and separation requirements are not met, all the assets, liabilities, revenues and expenses of the SPV are to be consolidated with the ADI’s reported amounts.
Note: ADIs should consult APRA in case of doubt as to whether a subsidiary or controlled entity that engaged in non-financial operations should be consolidated at Level 2 for capital adequacy purposes. 2. Consolidated group The consolidated group form is to be completed by all ADIs (where applicable) at Level 2 (i.e. the consolidated banking group level) defined in accordance with APS 110. Foreign ADIs and SCCIs operating through branches in Australia are not required to complete this form.
Reporting period
The form is to be completed as at the last day of the stated reporting quarter. Locally incorporated banks, foreign ADIs and Special Service Providers should submit the completed form to APRA within 20 business days after the end of the relevant reporting quarter. Credit Unions, Cairns Penny Savings & Loans Limited, Building Societies and SCCIs should submit the completed form to APRA within 15 business days after the end of the relevant reporting quarter.
Unit of measurement
Banks are asked to complete the form(s) in millions of Australian dollars rounded to one decimal place, and for other non-bank ADIs (including SCCIs), in whole Australian dollars (no decimal place). Amounts denominated in foreign currency are to be converted to AUD in accordance with AASB 121 The Effects of Changes in Foreign Exchange Rates (AASB 121). The general requirements of AASB 121 for translation are: 1. foreign currency monetary items outstanding at the reporting date must be translated at the spot rate at the reporting date;2 2. foreign currency non-monetary items that are measured at historical cost in a foreign currency must be translated using the exchange rate at the date of the transaction;3 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 (AASB 139). However, those foreign currency derivatives that are not within the scope of AASB 139 (e.g. some foreign currency derivatives that are embedded in other contracts) remain within the scope of AASB 121. 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; and 4. translation of financial reports of foreign operations. A foreign operation is defined in AASB 121 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. Basis of preparation For the purposes of this form, unless specifically advised in the ‘Instruction Guide for Specific Items’, ADIs are to report all exposures gross. No netting is to be recognised even if the ADI has in place netting agreements that are in the form of a legally recognised right to net or set off items of assets and liabilities in accordance with AASB 139, AASB 132 Financial Instruments: Disclosure and Presentation and AASB 7 Financial Instruments: Disclosures . Definitions This section provides guidance on the interpretation of certain items used in this form. 1. Licensed ADI (Level 1) This refers to the operations of the reporting ADI on a stand-alone basis. 2. Consolidated banking group (Level 2) For large exposure purposes, this is defined in accordance with APS 110 and refers to an ADI and all its subsidiaries (other than non-consolidated subsidiaries). Consolidation at Level 2 should be conducted in accordance with Australian accounting standards. This should cover the global operations of an ADI and its subsidiary entities, including other controlled banking entities, securities entities and other financial entities (e.g. finance companies, money market corporations, stockbrokers and leasing companies), except for entities involved in the following business activities: (a) insurance businesses (including friendly societies and health funds); (b) acting as manager, responsible entity, approved trustee, trustee or similar role in relation to funds management or the securitisation of assets; and (c) non-financial (commercial) operations; and/or (d) SPVs vehicles whose assets have satisfied the clean sale requirements set down in AGN 120.3 Purchase and Supply of Assets (including Securities issued by Special Purpose Vehicles (SPVs) (AGN 120.3) (refer Securitisation deconsolidation principle below). 3. Exposures An ADI’s exposures to a counterparty or a group of related counterparties at Level 1/Level 2 is the aggregate of all claims, commitments and contingent liabilities arising from on and off-balance sheet transactions (in both the banking and trading books) with the counterparty or group of related counterparties (refer paragraph 7 in Prudential Standard APS 221 Large Exposures (APS 221)). Note: Where credit risk is unequivocally transferred from a counterparty to a third party by an irrevocable letter of credit or a direct guarantee, the exposure is to be recorded against the third party. 4. A group of related counterparties For the purposes of this form, an ADI must treat entities as related where there is: (a) a linkage by cross-guarantees; (b) common ownership or management; (c) ability to control; (d) financial interdependency; or (e) other connections which, in the ADI's assessment, would lead it to regard facilities it has provided to the various entities as representing a common risk. Note: Family members are not to be treated as connected where they have independent retail relationships with the ADI at Level 1/Level 2 (although the ADI can choose to treat such exposures as connected should it consider appropriate to do so). 5. On-balance sheet exposures This refers to items of assets that are recognised or recorded on the statement of financial position of the ADI at Level 1/Level 2. 6. Off-balance sheet exposures This refers to items of assets or liabilities that are not recognised or recorded on the statement of financial position of the ADI at Level 1/Level 2 because they do not satisfy the asset or liability accounting recognition requirements. Items that were treated as Off-Balance Sheet items for the purpose of this form, pre-International Financial Reporting Standards (IFRS), will continue to be treated as Off-Balance Sheet items, post-IFRS. 7. Liability exposures This refers to deposits; other borrowings; bonds, notes and long-term borrowings; and loan capital as per ARF 320.0 Statement of Financial Position (Domestic Books) (ARF 320.0) or ARF 323.0 Statement of Financial Position (Licensed ADI) (ARF 323.0), as appropriate. Exclude tradeable security issues. Specific instructions 1. Licensed ADI The licensed ADI form has the following reporting components: Section A: Large exposures for locally incorporated banks Section A is to be completed by all locally incorporated banks. Report in this section on a net basis (explained in detail below) the bank’s 10 largest exposures to a counterparty or a group of related counterparties unrelated to the bank at Level 1 and all those exposures that exceed or equal to 10% of the bank’s Level 1 capital base (as reported in ARF 110.0 Capital Adequacy (Licensed ADI) (ARF 110.0 (Licensed)) for the same quarter).4 Section B: Large exposures for non-bank ADIs Section B is to be completed by all non-bank ADIs (including locally incorporated SCCIs). Report in this section on a net basis (explained in detail below) the ADI’s 10 largest exposures to a counterparty or a group of related counterparties unrelated to the ADI at Level 1 and all those exposures that exceed or equal to 5% of the ADI’s Level 1 capital base (as reported in ARF 110.0 (Licensed) for the same quarter) Section C: Large exposures for foreign ADIs/SCCI branches Section C is to be completed by all foreign ADIs, and SCCIs that operate as branches in Australia. Report in this section on a net basis (explained in detail below) the 20 largest exposures of the Australian branch to a counterparty or a group of related counterparties unrelated to the foreign ADI or SCCI.[2] Section D: Large liability exposures Section D is to be completed by ADIs that are not subject to scenario analysis under Prudential Standard APS 210 Liquidity on a stand-alone basis. Report in this section all liability exposures to a counterparty or a group of related counterparties that exceed 5% of the ADI’s total liabilities (as reported in ARF 320.0 or ARF 323.0 for the same quarter as appropriate). These reporting components are individually explained in detail below. Consolidated group The consolidated group form has the following reporting components: Section A: Large exposures for locally incorporated banks Section A is to be completed by all locally incorporated banks. Report in this section on a net basis (explained in detail below) the bank’s 10 largest exposures to a counterparty or a group of related counterparties unrelated to the bank at Level 2 and all those exposures that exceed or equal to 10% of the bank’s Level 2 capital base (as reported in ARF 110.0 Capital Adequacy (Consolidated Group) (ARF 110.0 (Consolidated)) for the same quarter). Section B: Large exposures for non-bank ADIs Section B is to be completed by all non-bank ADIs (including locally incorporated SCCIs). Report in this section on a net basis (explained in detail below) the ADI’s 10 largest exposures to a counterparty or a group of related counterparties unrelated to the ADI at Level 2 and all those exposures that exceed or equal to 5% of the ADI’s Level 2 capital base (as reported in ARF 110.0 (Consolidated) for the same quarter). These reporting components are individually explained in detail below. Section A: Large exposures for locally incorporated banks Section B: Large exposures for non-bank ADIs Instructions for Section A and Section B for both the Licensed ADI form and the consolidated group form are set out below. Column 1. Counterparty Report in column 1 the names of the relevant individual counterparties to which the ADI has exposures to at Level 1/Level 2 (as appropriate). In the case of exposures to a group of related counterparties, the ADI’s aggregate exposure to the relevant group should be reported as one exposure and shown in the name of the principal counterparty. Column 2. Category Report in column 2 the category of the counterparty reported in column 1 using the following abbreviations: · G/CB/IO Include: · Australian governments (Commonwealth, State, local) and foreign governments (central, state, local), Australian and foreign central banks, and other international organisations. · ADI Include: · Australian ADIs and foreign equivalents (and their subsidiaries). Note: (1) Bills accepted by another ADI or foreign equivalent should be reported as an exposure to ADI. (2) For foreign-owned locally incorporated ADIs (including SCCIs), report exposures to foreign (bank) parent(s) (including Australian and overseas branches), to the foreign parent’s overseas based subsidiaries and to their directly owned non-ADI entities operating in Australia in the memorandum items. · AO. Include: · all other counterparties not classified above. Column 3. On-balance sheet exposures Include: · all loans and advances, holding of debt and equity securities, and all other claims on the counterparty or group of related counterparties reported in column 1. Any accrued income associated with the exposure should also be included (e.g. interest, dividends). Report in column 3 the book value of all on-balance sheet exposures to the counterparty or group of related counterparties at Level 1/Level 2 (as appropriate) on a net basis. Net basis means net of exposures excluded under paragraphs 7(b)(i)-(vi) in APS 221, specifically: · exposures (e.g. claims or equity investments) deducted from the ADI’s Level 1/Level 2 capital (see Prudential Standard APS 111 Capital Adequacy: Measurement of Capital); · exposures to the extent that they are secured by cash deposits (subject to satisfying the criteria set out in Attachment B to Guidance Note AGN 112.1 Risk-Weighted On-Balance Sheet Credit Exposures (AGN 112.1)); · exposures to the extent that they are guaranteed by, or secured against securities issued by, governments or central banks (subject to satisfying the conditions set out in paragraphs 9, 12, 13, 14 and 15 of AGN 112.1); · exposures arising in the course of settlement of market-related contracts; · exposures to an ADI required as part of a liquidity support arrangement that has been certified by APRA under section 11CB of the Banking Act 1959; and · exposures to the extent that they have been written off or specifically provided for. Column 3.1 Loans (for Section B only) Report in column 3.1 the book value of all loans and advances to the counterparty or group of related counterparties at Level 1/Level 2 (as appropriate) on a net basis. Include any accrued interest associated with the exposure. Column 3.2 Other (for Section B only) Report in column 3.2 the book value of all other on-balance sheet exposures (e.g. investment and liquidity exposures) to the counterparty or group of related counterparties at Level 1/Level 2 (as appropriate) on a net basis. Any accrued income associated with the exposure should also be included (e.g. interest, dividends). Column 4. Off-balance sheet exposures Column 4.1 Non-market related Include: · all commitments, whether revocable or not, which have been advised to the counterparty or group of related counterparties reported in column 1 (see Attachment A to Guidance Note AGN 112.2 Risk-Weighted Off-Balance Sheet Credit Exposures (AGN 112.2) for examples of these commitments). Any potential chargeback exposures to the counterparty or group of related counterparties (merchants) arising from credit card acquiring activities should also be included. Exclude: · internal limits that have not been formally advised to the counterparty or group of related counterparties and may be cancelled at the ADI’s discretion at Level 1/Level 2 (as appropriate). Report in column 4.1 the value of all unused commitments to the counterparty or group of related counterparties (do not apply credit conversion factors or risk weightings to the value) on a net basis (i.e. net of exposures excluded under paragraphs 7(b)(i)-(vi) in APS 221 as detailed in point 3 above). ADIs that are engaged in credit card acquiring activities should use their own methodology in determining the amount of potential chargeback exposures to the counterparty (e.g. this could be based on the ADI’s historical trends of chargeback exposures to the counterparty). Any amount reported should be net of exposures excluded under paragraphs 7(b)(i)-(vi) in APS 221 as outlined in point 3 above. For SCCIs, any funds held as performance bond from merchants for settling any outstanding liabilities to the reporting SCCI (e.g. reimbursement for merchant chargebacks) must be placed in a trust account with an ADI authorised to accept deposits to be eligible for netting purposes. Exposures arising from repos (i.e. sale and repurchase agreements) and reverse repos (i.e. purchase and resale agreements) of securities should be reported as exposures to the issuer of the securities and collateralised loans to the counterparty respectively. For large exposures reporting, credit derivatives should be reported in the same way as guarantees, irrespective of whether they are held in an ADI’s trading book or banking book. This means, where an ADI is deemed by the requirements set down in Guidance Note AGN 112.4 Treatment of Credit Derivatives in the Banking Book (AGN 112.4) as having purchased protection on an underlying exposure using a credit derivative, the exposure is to the protection seller of the credit derivative. Where an ADI has sold protection using a credit derivative, the exposure is to the reference entity underlying the credit derivative. In all cases, exposures are to be reported at their gross values, where gross value is the amount of the exposure as defined in AGN 112.4. For credit derivatives in an ADI’s trading book, this requirement differs to APRA’s capital adequacy arrangements, which treat credit derivatives in the same way as market rate related transactions. The requirement is, however, consistent with how APRA requires other non-market rate related transactions to be incorporated into the large exposures reporting framework. The treatment of large exposures where protection is purchased requires some additional clarification in a couple of instances. Where an ADI has purchased protection using a credit derivative and the residual maturity of the credit derivative contract is less than the maturity of the underlying asset, the exposure is to the protection seller for the term of the credit derivative hedge and to the underlying exposure thereafter. Amongst other requirements, the credit derivative would need to have a residual maturity of at least one year to be regarded by APRA as a sufficient hedge. In the case of currency mismatches, that is, where the underlying exposure and the credit derivative hedge are denominated in different currencies, the proportion of the underlying exposure transferred to the protection seller will be determined by the current market exchange rate. The following table summarises the treatment of credit derivatives for large exposures reporting purposes.
Credit default swap
Protection seller
Exposure to the reference entity
Protection buyer
Exposure to the protection seller
Total-rate-of-return swap
Protection seller
Exposure to the reference entity
Protection buyer
Exposure to the protection seller
Credit-linked note
Protection seller
Exposure to the reference entity and the protection buyer
Protection buyer
Exposure to collateral (typically zero weighted)
First-to-default baskets
Protection seller
Exposures to all reference entities
Protection buyer
Exposure to protection seller for one reference entity and exposures to all other entities
Column 4.2 Market related Include: · all exposures arising from off-balance sheet market related contracts with the counterparty or group of related counterparties reported in column 1 at Level 1/Level 2 as appropriate (see AGN 112.2 for examples of these contracts). Report in column 4.2 the credit equivalent amounts of all market related contracts on a net basis (i.e. net of exposures excluded under paragraphs 7(b)(i)-(vi) in APS 221 large exposures as detailed in point 3 above). The credit equivalent amounts of these contracts are to be calculated in accordance with AGN 112.2 or Guidance Note AGN 112.3 Netting (AGN 112.3) where netting applies. Netting by novation and close-out netting are permissible for market related contracts provided all the requirements set out in AGN 112.3 for bilateral netting are met. Multilateral netting and netting of exposures against offsetting positions held by a group of related counterparties are not recognised. Column 5. Total exposures Column 5.1 Amount For Section A, this represents the total of column numbers 3, 4.1 and 4.2. For Section B, this represents the total of column numbers 3.1, 3.2, 4.1 and 4.2. Column 5.2 As % of capital base This represents the value reported for column 5.1 divided by the ADI’s capital base as reported in ‘Memorandum items’ (2.1). 2. Memorandum items 2.2 Capital base of licensed ADI/consolidated group (where applicable) Report the ADI’s capital base at Level 1 and Level 2 as appropriate for the reporting quarter (as shown in ARF 110.0 (Licensed) and ARF 110.0 (Consolidated) respectively for the same reporting quarter). 2.3 Aggregate exposure to non-deposit-taking subsidiaries of unrelated ADIs (including foreign equivalents) For any reported exposures to an unrelated ADI (including foreign equivalent) and its subsidiaries at Level 1 and Level 2 listed in column 1, report the ADI’s aggregate exposure to the unrelated ADI’s non-deposit-taking subsidiaries, if any, in the memorandum item. For example, if the ADI has reported aggregate exposure to an unrelated ADI and its subsidiaries of $10 million, of which $2 million is to the unrelated ADI’s non-deposit-taking subsidiaries, report the $2 million exposure in the memorandum item for additional information purposes. 2.4 Aggregate exposure to foreign parents and their subsidiaries Report the aggregate exposure to foreign (bank) parent(s) (including Australian and overseas branches), the foreign parent’s overseas based subsidiaries and their directly owned non-ADI entities operating in Australia.[3] 2.5 Five largest merchants by sales volume (for Section B only) For SCCIs that undertake credit card acquiring activities, report the five largest merchant customers in terms of aggregate transaction dollar value acquired by the reporting institution over the reporting quarter. Section C: Large exposures for foreign ADIs/SCCI branches Column 1. Counterparty Report in column 1 the names of the relevant individual counterparties to which the Australian branch has exposures to. In the case of exposures to a group of related counterparties, the branch’s aggregate exposure to the relevant group should be reported as one exposure and shown in the name of the principal counterparty. Column 2. Category Report in column 2 the category of the counterparty reported in column 1 using the following abbreviations: · G/CB/IO Include: · Australian governments (Commonwealth, State, local) and foreign governments (central, state, local), Australian and foreign central banks, and other international organisations. · ADI Include: · Australian ADIs and foreign equivalents (and their subsidiaries). Note: Bills accepted by another ADI or foreign equivalent should be reported as an exposure to ADI. · AO Include: · all other counterparties not classified above. Column 3. On-balance sheet exposures Include: · all loans and advances, holding of debt and equity securities, and all other claims on the counterparty or group of related counterparties reported in column 1. Any accrued income associated with the exposure should also be included (e.g. interest, dividends). Report in column 3 the book value of all on-balance sheet exposures to the counterparty or group of related counterparties on a net basis. Net basis means net of the following exposures: · exposures to the extent that they are secured by cash deposits (subject to satisfying the criteria set out in Attachment B to AGN 112.1); · exposures to the extent that they are guaranteed by, or secured against securities issued by, governments or central banks (subject to satisfying the conditions set out in paragraphs 9, 12, 13, 14 and 15 of AGN 112.1); · exposures arising in the course of settlement of market-related contracts; and · exposures to the extent that they have been written off or specifically provided for. Column 4. Off-balance sheet exposures Column 4.1 Non-market-related Include: · all commitments, whether revocable or not, which have been advised to the counterparty or group of related counterparties reported in column 1 (see Attachment A to AGN 112.1 for examples of these commitments). Any potential chargeback exposures to the counterparty or group of related counterparties (merchants) arising from credit card acquiring activities should also be included. Exclude: · internal limits that have not been formally advised to the counterparty or group of related counterparties and may be cancelled at the branch’s discretion. Report in column 4.1 the value of all unused commitments to the counterparty or group of related counterparties (do not apply credit conversion factors or risk weightings to the value) on a net basis (i.e. net of exposures detailed in point 3 above). Foreign ADIs and SCCI branches that are engaged in credit card acquiring activities should use their own methodology in determining the amount of potential chargeback exposures to the counterparty (e.g. this could be based on the branch’s historical trends of chargeback exposures to the counterparty). Any amount reported should be net of exposures detailed in point 3 above. Exposures arising from repos (i.e. sale and repurchase agreements) and reverse repos (i.e. purchase and resale agreements) of securities should be reported as exposures to the issuer of the securities and collateralised loans to the counterparty respectively. For large exposures reporting, credit derivatives should be reported in the same way as guarantees, irrespective of whether they are held in an ADI’s trading book or banking book. This means, where an ADI is deemed by the requirements set down in AGN 112.4 as having purchased protection on an underlying exposure using a credit derivative, the exposure is to the protection seller of the credit derivative. Where an ADI has sold protection using a credit derivative, the exposure is to the reference entity underlying the credit derivative. In all cases, exposures are to be reported at their gross values, where gross value is the amount of the exposure as defined in AGN 112.4. For credit derivatives in an ADI’s trading book, this requirement differs to APRA’s capital adequacy arrangements, which treat credit derivatives in the same way as market rate related transactions. The requirement is, however, consistent with how APRA requires other non-market rate related transactions to be incorporated into the large exposures reporting framework. The treatment of large exposures where protection is purchased requires some additional clarification in a couple of instances. Where an ADI has purchased protection using a credit derivative and the residual maturity of the credit derivative contract is less than the maturity of the underlying asset, the exposure is to the protection seller for the term of the credit derivative hedge and to the underlying exposure thereafter. Amongst other requirements, the credit derivative would need to have a residual maturity of at least one year to be regarded by APRA as a sufficient hedge. In the case of currency mismatches, that is, where the underlying exposure and the credit derivative hedge are denominated in different currencies, the proportion of the underlying exposure transferred to the protection seller will be determined by the current market exchange rate. The following table summarises the treatment of credit derivatives for large exposures reporting purposes.
Credit default swap
Protection seller
Exposure to the reference entity
Protection buyer
Exposure to the protection seller
Total-rate-of-return swap
Protection seller
Exposure to the reference entity
Protection buyer
Exposure to the protection seller
Credit-linked note
Protection seller
Exposure to the reference entity and the protection buyer
Protection buyer
Exposure to collateral (typically zero weighted)
First-to-default baskets
Protection seller
Exposures to all reference entities
Protection buyer
Exposure to protection seller for one reference entity and exposures to all other entities
Column 4.2 Market-related Include: · all exposures arising from off-balance sheet market related contracts with the counterparty or group of related counterparties reported in column 1 (see Guidance Note AGN 112.2 for examples of these contracts). Report in column 4.2 the credit equivalent amounts of all market related contracts on a net basis (i.e. net of exposures detailed in point 3 above). The credit equivalent amounts of these contracts are to be calculated in accordance with AGN 112.2 or AGN 112.3 where netting applies. Netting by novation and close-out netting are permissible for market related contracts provided all the requirements set out in AGN 112.3 for bilateral netting are met. Multilateral netting and netting of exposures against offsetting positions held by a group of related counterparties are not recognised. Column 5. Total exposures This represents the total of column numbers 3, 4.1 and 4.2. 2. Memorandum item 2.1 Five largest merchants by sales volume For SCCI branches that undertake credit card acquiring activities, report the five largest merchant customers in terms of aggregate transaction dollar value acquired by the reporting institution over the reporting quarter. Section D: Large liability exposures Column 1. Counterparty Report in column 1 the names of the relevant individual counterparties or group of related counterparties to which the ADI has liability exposure concentration. In the case of exposures to a group of related counterparties, the ADI’s aggregate exposure to the relevant group should be reported as one exposure and shown in the name of the principal counterparty. Column 2. Deposits Include: · total deposits held for the counterparty or group of related counterparties reported in column 1. Deposits are defined as per ARF 320.0 or ARF 323.0 as appropriate. Exclude: · tradeable security issues. Column 3. Other borrowings, bonds, notes and long-term borrowings, and loan capital Include: · total “Other borrowings”, “Bonds, notes and long-term borrowings”, and “Loan capital” (defined as per ARF 320.0 or ARF 323.0 as appropriate) due to the counterparty or group of related counterparties reported in column 1. Exclude: · tradeable security issues.
[1] These instructions and any relevant form are to apply to the Bank of China as if its branch operations in Australia constituted a locally-incorporated bank. Accordingly: (a) the Bank of China is to undertake stand-alone or ‘Licensed ADI’ reporting in respect of the bank’s Australian branch operations, as if those operations constituted a locally-incorporated bank; and (b) ‘Consolidated Group’ reporting for Bank of China is to encompass (i) those branch operations (as if they constituted a locally-incorporated bank) and (ii) any locally-incorporated subsidiary of the Bank of China.
2 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. 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.
4 Exposures to related entities (defined in accordance with Prudential Standard APS 222 Associations with Related Entities) are to be reported in ARF 222.0 Exposures to Related Entities (ARF 222.0).
[2] Exposures of the Australian branch to head office, other overseas branches, Australian or overseas subsidiaries are to be reported in ARF 222.0.
[3] Exposures to related entities (as defined in Prudential Standard APS 222 Associations with Related Entities) that form part of the Australian conglomerate group are to be reported in ARF 222.0 Exposures to Related Entities.
