Financial Sector (Collection of Data) (reporting standard) determination No. 11 of 2020

Reporting Standard ARS 222.0 Exposures to Related Entities

Financial Sector (Collection of Data) Act 2001

I, John Lonsdale, 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:

(a)          REVOKE Financial Sector (Collection of Data) (reporting standard) determination No. 12 of 2018, including Reporting Standard ARS 222.0 Exposures to Related Entities made under that Determination; and

(b)          DETERMINE Reporting Standard ARS 222.0 Exposures to Related Entities, in the form set out in the Schedule, which applies to the financial sector entities to the extent provided in paragraph 3 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, and the revoked reporting standard shall cease to apply, on 1 January 2022.

This instrument commences on 1 January 2022.

Dated: 8 December 2020

[Signed]

John Lonsdale

Deputy Chair

Interpretation

In this Determination:

APRA means the Australian Prudential Regulation Authority.

financial sector entity has the meaning given by section 5 of the Act.

Schedule

Reporting Standard ARS 222.0 Exposures to Related Entities comprises the document commencing on the following page.

Reporting Standard ARS 222.0

Exposures to Related Entities

Authority

1. This Reporting Standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001.

Purpose

2.             Information collected under this Reporting Standard is used by APRA for the purpose of prudential supervision. It may also be used by the Reserve Bank of Australia (RBA) and the Australian Bureau of Statistics (ABS).

Application

3.             This Reporting Standard applies to all authorised deposit-taking institutions (ADIs) with the exception of providers of purchased payment facilities (PPFs).

Commencement

4.             This Reporting Standard commences on 1 January 2022 and applies to reporting periods ending on or after that date.

Information required

5.             A locally incorporated ADI to which this Reporting Standard applies must provide APRA with the information required by the Reporting Form ARF 222.0 Exposures to related entities (ARF 222.0) on a Level 1 basis for each reporting period.

6.             A foreign ADI to which this Reporting Standard applies must provide APRA with the information required by Reporting Form ARF 222.1 Exposures to related entities – foreign ADI (ARF 222.1) on a domestic book basis for each reporting period.

Method of submission

7.             The information required by this Reporting Standard must be given to APRA in electronic format, using the ‘Direct to APRA’ application or by a method (i.e. web-based solution) notified by APRA prior to submission.

Note: The Direct to APRA application software (also known as D2A) may be obtained from APRA.

Reporting periods and due dates

8.             Subject to paragraph 10 of this Reporting Standard, an ADI to which this Reporting Standard applies must provide the information required by this Reporting Standard in respect of each quarter based on the ADI’s financial year (within the meaning of the Corporations Act 2001).

9.             Subject to paragraph 11 of this Reporting Standard, the information required by this Reporting Standard must be provided to APRA within 28 calendar days after the end of the reporting period to which the information relates.

10.         APRA may 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 RBA and the ABS.

11.         APRA may grant an ADI an extension of a due date in which case the new date will be the date specified in the notice of extension.

Note: For the avoidance of doubt, if the due date for a particular reporting period falls on a day other than a usual business day, an ADI is nonetheless required to submit the information required no later than the due date.

Quality control

12.         All information provided by an ADI under this Reporting Standard must be the product of systems, processes and controls that have been reviewed and tested by the external auditor of the ADI as set out in Prudential Standard APS 310 Audit and Related Matters. Relevant standards and guidance statements issued by the Auditing and Assurance Standards Board provide information 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 information provided by an ADI under this Reporting Standard.

13.         All information provided by an ADI under this Reporting Standard must be subject to systems, processes and controls developed by the ADI for the internal review and authorisation of that information. These systems, processes and controls are to assure the completeness and reliability of the information provided.

Authorisation

14.         When an officer of an ADI submits information under this Reporting Standard using the D2A application or other method notified by APRA, it will be necessary for the officer to digitally sign the relevant information using a digital certificate acceptable to APRA.

Minor alterations to forms and instructions

15.         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 the application to the form,

without changing any substantive requirement in the form or instructions.

16.         If APRA makes such a variation, it must notify each ADI that is required to report under this Reporting Standard.

Transition

17.         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 by the determination that makes this Reporting Standard (being the Reporting Standard which this Reporting Standard replaces), as in force immediately before the commencement of this Reporting Standard.

transitional reporting period means a reporting period under the old Reporting Standard:

(a)          that ended on or before 31 December 2021; 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.

Note: For the avoidance of doubt, if an ADI was required to report under an old Reporting Standard, and the reporting documents were due before the date of revocation of the old Reporting Standard, the ADI is still required to provide the overdue reporting documents in accordance with the old Reporting Standard.

Interpretation

18.         In this Reporting Standard:

AASB has the meaning given in section 9 of the Corporations Act 2001.

ADI means an authorised deposit-taking institution within the meaning of the Banking Act 1959.

APRA means the Australian Prudential Regulation Authority established under the Australian Prudential Regulation Authority Act 1998.

due date means the last day of the 28 calendar days provided for in paragraph 9 or, if applicable, the date on a notice of extension given under paragraph 11 of this Reporting Standard.

foreign ADI has the meaning given in section 5 of the Banking Act 1959.

Level 1 has the meaning given in Prudential Standard APS 001 Definitions.

locally incorporated means incorporated in Australia or in a State or Territory of Australia, by or under a Commonwealth, State or Territory law.

provider of purchased payment facilities means an ADI that is subject to a condition on its authority under section 9AA of the Banking Act 1959 confining the banking business that the ADI is authorised to carry on to providing purchased payment facilities.

reporting period means a quarter of a financial year as provided for in paragraph 8 or, if applicable, the period specified in a notice given under paragraph 10 of this Reporting Standard.

19.         Unless the contrary intention appears, a reference to an Act, Prudential Standard, Reporting Standard or Australian Accounting or Auditing Standard is a reference to the instrument as in force or existing from time to time.

20.         Where this Reporting Standard provides for APRA to exercise a power or discretion, the power or discretion is to be exercised in writing.

Reporting Form ARF 222.0

Exposures to Related Entities

Instruction Guide

This instruction guide is designed to assist in the completion of Reporting Form ARF 222.0 Exposures to related entities (ARF 222.0). This form collects information on an authorised deposit-taking institution’s (ADI’s) exposures to related entities.

In completing this form, ADIs must refer to Prudential Standard APS 222 Associations with Related Entities (APS 222).

General directions and notes

Reporting entity

ARF 222.0 must be completed on a Level 1 basis by all ADIs, with the exception of:

(a)          foreign ADIs; and

(b)          providers of purchased payment facilities.

Securitisation deconsolidation principle

1. Where an ADI (or a member of its Level 2 consolidated group) participates in a securitisation that meets APRA’s operational requirements for regulatory capital relief under Prudential Standard APS 120 Securitisation (APS 120):

(a)          special purpose vehicles (SPVs) holding securitised assets may be treated as non-consolidated independent third parties for regulatory reporting purposes, irrespective of whether the SPVs (or their assets) are consolidated for accounting purposes; and

(b)          the assets, liabilities, revenues and expenses of the relevant SPVs may be excluded from the ADI’s reported amounts in APRA’s regulatory reporting returns.

2.             Where an ADI (or a member of its Level 2 consolidated group) participates in a securitisation that does not meet APRA’s operational requirements for regulatory capital relief under APS 120, or the ADI undertakes a funding-only securitisation or synthetic securitisation, such assets are to be reported as on-balance sheet in APRA’s regulatory reporting returns.

Securitisation exclusions

Funding-only securitisations that are self-securitisations are excluded from the reporting requirements in ARF 222.0.

Reporting period

This form is to be completed as at the last calendar day of each quarter based on the financial year (within the meaning of the Corporations Act 2001) of the ADI.

Unit of measurement

ADIs must complete the form in whole Australian dollars (no decimal place).

Amounts denominated in foreign currency must be converted to AUD in accordance with Accounting Standard AASB 121 The Effects of Changes in Foreign Exchange Rates (AASB 121).

Basis of preparation

For the purposes of this form, ADIs must report all exposures including both the effect of Credit risk mitigation (CRM) techniques (item 1) as well as on the basis of excluding the effect of CRM techniques (item 2), in accordance with Prudential Standard APS 221 Large Exposures (APS 221).

In completing this form, ADIs must apply the requirements for netting specified in Attachment A to APS 221.

Definitions

Terms highlighted in bold italics indicate that the definition is provided in these instructions.

Credit risk mitigation (CRM) means the CRM techniques allowed in Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk (APS 112).

ELE subsidiary has the meaning given in paragraph 8(c) of APS 222.

ELE subsidiary country means the country where the ELE subsidiary is domiciled. ADIs are to report the English name of the relevant country as assigned by the ISO 3166 Maintenance Agency to a country code defined under the International Organization for Standardization’s International Standard ISO 3166. The ISO 3166 Maintenance Agency maintains a free online browsing platform setting out the names of countries and their corresponding codes, available at https://www.iso.org/obp/ui/#search/code/.

ELE subsidiary name means the legal name of the ELE subsidiary.

Excluded exposures means exposures excluded from large exposures under paragraph 18 of APS 221.

Exposure means an ADI’s exposure to a related entity within the meaning given in paragraph 34 of APS 222, and measured in accordance with paragraphs 35 to 37 of APS 222.

Legal Entity Identifier is a 20-digit, alpha-numeric code issued by a Local Operating Unit in accordance with the International Organization for Standardization’s International Standard ISO 17442. The Global Legal Entity Identifier Foundation maintains a free online searchable database of Legal Entity Identifiers, available at https://search.gleif.org/#/search/.

Market related means off-balance sheet exposures arising from market related contracts.

Non-market related means off-balance sheet exposures that are not market related.

Off-balance sheet exposures means the off-balance sheet portion of any exposure, measured in accordance with Attachment A to APS 221.

On-balance sheet exposures means the on-balance sheet portion of any exposure, measured in accordance with Attachment A to APS 221.

Related ADI means a related entity which is an ADI.

Related entity has the meaning given in paragraph 8(f) of APS 222.

Related entity name means the legal name of the related entity.

Related entity sector means the sector of the related entity of the exposure. These are:

•                 banking;

•                 insurance;

•                 superannuation;

•                 SPVs;

•                 other financial institutions; and

•                 other counterparties.

Settlement exposures has the meaning given in paragraph 18(g) of APS 221.

Substantial shareholder has the meaning given in paragraph 8(i) of APS 222.

Substantial shareholder name means the legal name of the substantial shareholder.

Tier 1 Capital has the meaning given in Prudential Standard APS 111 Capital Adequacy: Measurement of Capital (APS 111).

Related entity category

Regulated means the related entity is regulated by APRA or an equivalent banking, superannuation or insurance prudential regulator overseas.

Non-regulated means the related entity is not regulated by APRA or an equivalent banking, superannuation or insurance prudential regulator overseas.

Related entity sectors

Banking institution means an ADI or banking institutions authorised in another jurisdiction.

Insurance corporations means:

•                 life insurance corporations registered under the Life Insurance Act 1995;

•                 general insurance corporations authorised under the Insurance Act 1973 (or by virtue of determinations made by APRA under the General Insurance Reform Act 2001);

•                 private health insurance corporations registered under the Private Health Insurance (Prudential Supervision) Act 2015;

•                 the Export Finance Insurance Corporation;

•                 private sector and government-owned general and health insurance enterprises, both proprietary and mutual; and

•                 any overseas insurance corporation.

Other counterparties includes any related entity that is not a banking institution, an SPV, insurance corporation, superannuation fund or other financial institution.

Other financial institutions means all entities mainly engaged in financial intermediation and the provision of auxiliary financial services, other than banking institutions, insurance corporations, and superannuation funds.

SPV means Special Purpose Vehicle.

Superannuation funds means complying funds for the purposes of the Superannuation Industry (Supervision) Act 1993, other autonomous funds established for the benefit of public sector employees and any overseas funds designed specifically for the purpose of providing a pension or other income stream on retirement.

Specific instructions

Section A: Exposures to related entities

Section B: Extended Licensed Entity (ELE)

Section C: Excluded exposures

Memorandum Items

Section D: Substantial Shareholdings

Reporting Form ARF 222.1

Exposures to related entities – foreign ADI

Instruction Guide

This instruction guide is designed to assist in the completion of Reporting Form ARF 222.1 Exposures to related entities  - foreign ADI (ARF 222.1). This form collects information on the exposures of the Australian branch of a foreign authorised deposit-taking institution (foreign ADI) to the head office, other branches, and subsidiaries of the foreign ADI.

In completing this form, foreign ADIs must refer to Prudential Standard APS 222 Associations with Related Entities (APS 222).

General directions and notes

Reporting entity

ARF 222.1 must be completed on a domestic book basis by all foreign ADIs.

Domestic books means an unconsolidated report of positions, transactions and other information recorded on the Australian books of the body corporate authorised by APRA to carry on banking business under the Banking Act 1959. Domestic books include transactions and positions with both residents and non-residents that are recorded on the Australian books of these entities.

Reporting period

This form is to be completed as at the last calendar day of each quarter based on the financial year (within the meaning of the Corporations Act 2001) of the foreign ADI.

Unit of measurement

ADIs must complete the form in whole Australian dollars (no decimal place).

Amounts denominated in foreign currency must be converted to AUD in accordance with Accounting Standard AASB 121 The Effects of Changes in Foreign Exchange Rates (AASB 121).

Basis of preparation

For the purposes of this form, foreign ADIs must report all exposures. In completing this form, foreign ADIs must apply the requirements for netting specified in Attachment A to Prudential Standard APS 221 Large Exposures (APS 221).

A foreign ADI may report using the requirements and definitions that it applies in reporting exposures under the requirements of its home jurisdiction, unless otherwise notified by APRA.

Definitions

Terms highlighted in bold italics indicate that the definition is provided in these instructions.

Credit risk mitigation (CRM) means the CRM techniques allowed in Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk (APS 112).

Exposure is defined in paragraphs 34 to 37 of APS 222.

Foreign ADI related entities means the head office, individual overseas branches, and individual Australian and overseas subsidiaries of the foreign ADI.

Legal Entity Identifier is a 20-digit, alpha-numeric code issued by a Local Operating Unit in accordance with the International Organization for Standardization’s International Standard ISO 17442. The GlobalLegal Entity Identifier Foundation maintains a free online searchable database of Legal Entity Identifiers, available at https://www.gleif.org/en/lei/search.

Market related means off-balance sheet exposures arising from market related contracts.

Non-market related means off-balance sheet exposures that are not market related.

Off-balance sheet exposures means the off-balance sheet portion of any exposure, measured in accordance with Attachment A to APS 221.

On-balance sheet exposures means the on-balance sheet portion of any exposure, measured in accordance with Attachment A to APS 221.

Related entity name means the legal name of the foreign ADI related entity.

Related entity sector means the type of sector of the foreign ADI related entity of the exposure. These include:

•                 banking;

•                 insurance;

•                 superannuation;

•                 SPVs;

•                 other financial institutions; and

•                 other counterparties.

Related entity sector

Banking institution means an authorised deposit-taking institution within the meaning of the Banking Act 1959, as well as banking institutions authorised in other jurisdictions.

Insurance corporation means:

•                 life insurance corporations registered under the Life Insurance Act 1995;

•                 general insurance corporations authorised under the Insurance Act 1973 (or by virtue of determinations made by APRA under the General Insurance Reform Act 2001);

•                 private health insurance corporations registered under the Private Health Insurance (Prudential Supervision) Act 2015;

•                 the Export Finance Insurance Corporation;

•                 private sector and government-owned general and health insurance enterprises, both proprietary and mutual; and

•                 any insurance corporation overseas.

Other counterparties includes any foreign ADI related entity that is not a banking institution, an SPV, insurance corporation, superannuation fund or other financial institutions.

Other financial institutions means all entities mainly engaged in financial intermediation and the provision of auxiliary financial services, other than banking institutions, insurance corporations, superannuation funds, other counterparties.

SPV means Special Purpose Vehicle.

Superannuation funds means complying funds for the purposes of the Superannuation Industry (Supervision) Act 1993, other autonomous funds established for the benefit of public sector employees and any overseas funds designed specifically for the purpose of providing a pension or other income stream on retirement.

Specific instructions

Section A: Exposures to head office, overseas branches, Australian and overseas subsidiaries