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Financial Sector (Collection of Data) (reporting standard) determination No. 13 of 2024

Reporting Standard ARS 113.0 Capital Adequacy: Internal Ratings-based Approach to Credit Risk

Financial Sector (Collection of Data) Act 2001

I, Andrew Robertson, 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:

 

  1.           revoke Financial Sector (Collection of Data) (reporting standard) determination No. 50 of 2023, including Reporting Standard ARS 113.0 Capital Adequacy: Internal Ratings-based Approach to Credit Risk made under that Determination; and

 

  1.           determine Reporting Standard ARS 113.0 Capital Adequacy: Internal Ratings-based Approach to Credit Risk, in the form set out in the Schedule, which applies to the financial sector entities to the extent provided in paragraphs 3 and 4 of that reporting standard.

 

Under section 15 of the Act, I declare that Reporting Standard ARS 113.0 Capital Adequacy: Internal Ratings-based Approach to Credit Risk shall begin to apply to those financial sector entities, and the revoked reporting standard shall cease to apply, on the day after this instrument is registered on the Federal Register of Legislation.

 

This instrument commences on the day after it is registered on the Federal Register of Legislation.

 

Dated: 5 September 2024

 

 

 

Andrew Robertson

General Manager - Chief Data Officer

Technology and Data Division

 

Interpretation

In this Determination:

APRA means the Australian Prudential Regulation Authority.

Federal Register of Legislation means the register established under section 15A of the Legislation Act 2003.

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

Schedule

 

Reporting Standard ARS 113.0 Capital Adequacy: Internal Ratings-based Approach to Credit Risk comprises the document commencing on the following page.

Commonwealth Coat of Arms of Australia

Reporting Standard ARS 113.0

Capital Adequacy: Internal Ratings-based Approach to Credit Risk

This Reporting Standard outlines the requirements for the provision of information to APRA in relation to an authorised deposit-taking institution’s exposures that are subject to calculations using the internal ratings-based approach to credit risk.

It includes associated instructions (all of which are attached and form part of this Reporting Standard) and should be read in conjunction with Prudential Standard APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk.

  1.              This Reporting Standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001.
  1.              The information reported to APRA under this Reporting Standard is used by APRA for the purpose of prudential supervision including assessing compliance with capital adequacy standards. It may also be used by the Reserve Bank of Australia (RBA) and the Australian Bureau of Statistics (ABS).
  1.               This Reporting Standard applies to an authorised deposit-taking institution (ADI) that is applying the internal ratings-based approach to credit risk to all or part of its exposures for capital adequacy purposes (refer to Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk (APS 112) or Prudential Standard APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk (APS 113), as appropriate).
  2.              This Reporting Standard may also apply to the non-operating holding company (NOHC) of an ADI (refer to paragraph 7).
  3.              This Reporting Standard applies for reporting periods ending on or after 30 September 2024.
  1.              An ADI to which this Reporting Standard applies must provide APRA with the information required by this Reporting Standard designated for an ADI at Level 1 in respect of each reporting period.
  2.               If an ADI to which this Reporting Standard applies is part of a Level 2 group, the ADI must also provide APRA with the information required by this Reporting Standard designated for an ADI at Level 2 for each reporting period, unless the ADI is a subsidiary of an authorised NOHC.  If the ADI is a subsidiary of an authorised NOHC, the ADI’s immediate parent NOHC must provide APRA with the information required by that form for each reporting period.  In doing so, the immediate parent NOHC must comply with this Reporting Standard (other than paragraphs 6 and 13) as if it were the relevant ADI.
  1.              The information required by this Reporting Standard must be given to APRA:
  1.    in electronic format using an electronic method available on APRA’s website; or
  2.    by a method notified by APRA prior to submission.
  1.              Subject to paragraph 10, an ADI to which this Reporting Standard applies 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.
  2.          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:
  1.           the particular circumstances of the ADI;
  2.           the extent to which the information is required for the purposes of the prudential supervision of the ADI; and
  3.           the requirements of the RBA or the ABS.
  1.          The information required by this Reporting Standard must be provided to APRA within 35 calendar days after the end of the reporting period to which this information relates.
  2.          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.

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.

  1.          All information provided by an ADI under this Reporting Standard (except for the information required under paragraph 7) 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 required by the external auditor 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.
  2.          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. These systems, processes and controls are to assure the completeness and reliability of the information provided.
  1.          When an officer or agent of an ADI provides the information required by this Reporting Standard using an electronic format, the officer or agent must digitally sign the relevant information using a digital certificate acceptable to APRA.
  1.          APRA may, by written notice to the ADI, vary the reporting requirements of this Reporting Standard in relation to that ADI.

Transition

  1.          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 that this Reporting Standard replaces); and

transitional reporting period means a reporting period within the meaning given in the old reporting standard:

  1.           that ended before 30 September 2024; and
  2.           in relation to which the ADI would have been required, if the old reporting standard had not been revoked, 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 any overdue reporting documents in accordance with the old reporting standard.

  1.          In this Reporting Standard the following definitions are applicable:

AASB has the meaning 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.

APS 001 means Prudential Standard APS 001 Definitions or, if that standard is revoked, Prudential Standard CPS 001 Defined terms as it applies to an ADI or authorised NOHC.

authorised NOHC has the meaning given in the Banking Act 1959.

business days means ordinary business days, exclusive of Saturdays, Sundays and public holidays.

due date means the relevant due date under paragraph 11 or, if applicable, the date on a notice of extension given under paragraph 12.

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

immediate parent NOHC means an authorised NOHC, or a subsidiary of an authorised NOHC, that is an immediate parent NOHC.

IRB approach refers to the internal ratings-based approach to credit risk, as set out in APS 113.

Level 1 has the meaning given to that expression in APS 001.

Level 2 has the meaning given to that expression in APS 001.

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

reporting period means a period mentioned in paragraph 9 or, if applicable, paragraph 10.

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

Reporting Standard ARS 113.0

Capital Adequacy: Internal Ratings-based Approach to Credit Risk

Except as otherwise specified in these instructions, the following applies:

  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):
  1.           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;
  2.           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; and
  3.           the underlying assets (i.e. the pool) under such a securitisation may be excluded from the calculation of regulatory capital (refer to APS 120), however, the ADI must still hold regulatory capital for  any securitisation exposure[1] that it retains or acquires and such exposures are to be reported in Reporting Form ARF 120.1 Securitisation – Regulatory Capital. The risk-weighted assets (RWA) relating to such securitisation exposures must also be reported in ARS 110.0.
  1.              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.

Requirements applying to certain ADIs

An ADI that has received IRB approval under APS 113 and has approval for partial use of the standardised approach under APS 112 is expected to report under this reporting form in respect of relevant operations that are covered by the IRB approach. There are reporting obligations under ARS 112.0 in respect of operations that remain under standardised approach.

An ADI that is operating under the APS 112 standardised approach to credit risk, but has applied to adopt IRB approach is expected to meet the requirements of this standard for those exposures they are seeking approval to use the IRB approach under APS 113.

All terms highlighted in bold italics in this Reporting Standard are as defined in APS 113.

 

 

 

Table 1 captures the credit risk-weighted assets (RWA) and risk components of all exposures under the internal ratings-based approach to credit risk, except the following specifically excluded items (refer to APS 113):

(a)        assets or investments that are required to be deducted from Tier 1 or Tier 2 capital under Prudential Standard APS 111 Capital Adequacy: Measurement of Capital;

(b)        securitisation exposures, which are subject to the requirements of APS 120; and

(c) exposures of an overseas banking subsidiary that is prudentially regulated by a prescribed New Zealand authority.

Complete Table 1 for all exposures that use the internal ratings-based approach to credit risk, excluding exposures held by New Zealand subsidiaries.

The table is to be completed at Level 1 and Level 2 by all ADIs other than foreign ADIs and providers of purchased payment facilities. 

If an ADI is a subsidiary of a NOHC, the report at Level 2 is to be provided by the ADI’s immediate parent NOHC.[2]

Report data as at the end of the reporting period.

When used together, the symbols <= mean less than or equal to and the symbols >= mean greater than or equal to. 

Reporting tables

The table described in this reporting standard lists each of the data fields required to be reported. The data fields are listed sequentially in the column order that they will appear in the reported data set. Constraints on the data that can be reported for each field have also been provided. The Unique identifier column indicates which field or fields form the primary key of the table. Where a field has ‘Y’ in the Unique identifier column, this denotes that this field forms part of the primary key for the table. A blank cell in the Unique identifier column means that the field does not form part of the primary key for the table. Any specific combination of values in the fields that form the primary key of a table must not appear on more than one row in that table when reported

Unless otherwise specified, report all values in whole Australian dollars (no decimal place).

Percentages are to be reported as an unconverted number to two decimal places or as specified. For example, 12.34 per cent is to be reported as 0.1234.

Convert amounts denominated in foreign currency to Australian dollars in accordance with Australian Accounting Standards.

 

Name

Unique identifier

Applicable to:

Valid values

Description

1

Exposure classification

Y

 

  • Sovereign
  • Financial institution
  • Corporate - large - non-IPRE
  • Corporate - large - IPRE
  • Corporate - SME - non-IPRE
  • Corporate - SME - IPRE
  • Corporate - other - non-IPRE
  • Corporate - other - IPRE
  • Retail - SME
  • Retail - QRR
  • Retail - residential mortgages - owner occupied and principal and interest
  • Retail - residential mortgages - five or more investment properties
  • Retail - residential mortgages - other
  • Retail - other
  • Supervisory slotting - project finance
  • Supervisory slotting - object finance
  • Supervisory slotting - commodities finance
  • Supervisory slotting - IPRE
  • Exposures to residual value

Exposures that are excluded from the scope of APS 113 (paragraph 11) would be reported in the relevant table.

Exposure classes are as defined in APS 113. Also refer to Prudential Practice Guide APG 113 Internal Ratings-based Approach to Credit Risk  as existing at the commencement of this reporting standard for further details on the definitions.

Exposures to residual value captures the residual value of IRB lease exposures that expose an ADI to residual value risk. Refer to Attachment A of APS 113. Non-IRB lease exposures and related residual value exposures would be reported under ARS 112.0.

Where Exposures to residual value is selected in column 1, for columns 2 to 17, populate the non-numeric columns with Not Applicable or No as appropriate and leave the numeric columns blank.

2

RWA overlay

Y

 

  • Yes
  • No

This column applies to exposure classes in column 1 in which there are RWA overlays, defined as any additional RWA amount, initiated by APRA or the ADI, implemented as a direct add-on as opposed to an adjustment to a model or a risk parameter (e.g. PD).

For each exposure class with an RWA overlay, report Yes in column 2 and report the total RWA overlay without the 1.1 scalar in column 20. For columns 3 to 19 and 22, populate the non-numeric columns with Not Applicable or No as appropriate and leave the numeric columns blank.

For all other exposures, report No in this column and populate columns 3 to 23 as per the instructions. RWA reported in column 20 must not contain any overlay.

To clarify, for an exposure class with an RWA overlay, there should be a single row that captures the total RWA overlay for that exposure class. The sum of RWA over rows with Yes and No in column 2 will be the total RWA for that exposure class.

For RWA overlays that span multiple exposure classes, the overlay amount should be split across each applicable exposure class.

 

3

Purchased receivable

Y

 

  • Yes
  • No

For purchased receivables, report Yes. For all other exposures, report No.

 

4

Asset value correlation multiplier (AVCM)

Y

 

  • Yes
  • No

For financial institution exposures subject to an AVCM of 1.25, report Yes. For all other exposures, report No.

5

On/off balance sheet

Y

 

  • On-balance sheet
  • Off-balance sheet
  • Not Applicable

Off-balance sheet exposures include both non-market-related (including undrawn commitments) and market-related off-balance sheet transactions.

 

For Exposures to residual value, report Not Applicable.

 

6

Nature of transaction

Y

 

  • Direct credit substitutes
  • Sale and repurchase agreements and asset sales with recourse
  • Lending of securities or posting of securities as collateral
  • Forward asset purchases, forward deposits and partly paid shares and securities
  • Other off-balance sheet items that are credit substitutes
  • Unsettled securities, commodities and foreign exchange transactions accounted for at settlement date
  • Other commitments with certain drawdown
  • Note issuance and revolving underwriting facilities
  • Performance-related contingencies
  • Other commitments (40% CCF)
  • Other commitments (100% CCF)
  • Short-term self-liquidating trade letters of credit arising from the movement of goods
  • Intraday limits
  • Irrevocable standby commitments under industry support arrangements
  • Modelled EAD
  • Market-related exposure
  • Not Applicable

 

Report the nature of the transaction for off-balance sheet exposures only. For all other exposures, report Not Applicable.

Transaction types are defined in Attachment C of APS 112. Also refer to Prudential Practice Guide APG 112 Standardised Approach to Credit Risk as existing at the commencement of this reporting standard for further details of the definitions.

Select Modelled EAD for exposures that use internal estimates of EAD (e.g. revolving retail exposures).

Select Market-related exposure for exposures that expose an ADI to counterparty credit risk (refer to APS 113).

 

 

 

 

7

Weighted average credit conversion factor (CCF)

 

 

Percentage to 2 decimal places

Report the exposure-weighted average CCF for rows with Modelled EAD in column 6.

Note that the average should be calculated as the exposure (after CRM and CCF) weighted average for each relevant row.

For all other rows, leave this column blank.

8

Slotting category

Y

 

  • Strong
  • Good
  • Satisfactory
  • Weak
  • Default
  • Not Applicable

Report the slotting category for exposures subject to the supervisory slotting approach only. For all other exposures, report Not Applicable.

Where the exposure is slotted, for columns 9 to 17, populate the non-numeric columns with Not Applicable and leave the numeric columns blank.

9

Internal probability of default (PD) grade

Y

 

Text

Report the label assigned to the internal PD grade or pool (e.g. A1, B1, etc.).

The allocation of exposures to each PD grade should be made after the application of regulatory floors on PD.

For rows to which this column does not apply (e.g. slotted exposures), report Not Applicable.

10

Probability of default (PD)

 

 

Percentage to 5 decimal places

For each internal PD grade or pool in column 9, report the PD estimate for the internal grade or pool.

For rows to which this column does not apply (e.g. slotted exposures), leave this column blank.

11

Prescribed loss given default (LGD) category

Y

 

  • Eligible financial collateral (0%)
  • Eligible financial receivables (20%)
  • Eligible CRE or RRE  (20%)
  • Other eligible physical collateral  (25%)
  • Senior unsecured (5%)
  • Senior unsecured (25%)
  • Senior unsecured (40%)
  • Senior unsecured (45%)
  • Senior unsecured (50%)
  • Subordinated debt (75%)
  • Dilution risk (100%)
  • Not Applicable

 

This column contains the FIRB LGD categories in APS 113 and is applicable to exposures subject to the FIRB approach and the dilution risk LGD category which is applicable to purchased receivable exposures. For all other exposures, report Not Applicable.

Senior unsecured LGD categories include senior exposures secured by ineligible collateral under the FIRB approach.

For partly secured exposures or exposures with mixed eligible collateral, exposures should be allocated to the relevant FIRB LGD categories as detailed in Attachment B of APS 113. For partly secured exposures, the amount reported in column 19 against a senior unsecured category should be calculated as start formula EAD times start fraction E subscript U over open bracket E times open bracket 1 plus H subscript E close bracket close bracket end fraction end formula, where E is the committed amount.

The Dilution risk (100%) category is used for purchased receivables only. Refer to Attachment F of APS 113.

12

Loan-to-valuation ratio (LVR)

Y

 

  • 0% to <= 50%
  • 50.01% to <= 60%
  • 60.01% to <= 70%
  • 70.01% to <= 80%
  • 80.01% to <= 90% - LMI
  • 80.01% to <= 90% - non-LMI
  • 90.01% to <= 100% - LMI
  • 90.01% to <= 100% - non-LMI
  • > 100% - LMI
  • > 100% - non-LMI
  • Not Applicable

This column is applicable to Retail - residential mortgages - owner occupied and principal and interest, Retail - residential mortgages - five or more investment properties and Retail - residential mortgages – Other exposures except where the exposure is a purchased receivable.

 

Loan-to-valuation ratio (LVR) and lenders’ mortgage insurance (LMI) are defined in APS 112.

 

Allocate exposures to the appropriate LVR-LMI band based on the exposure’s LVR and the application of eligible LMI.

For all other exposures, report Not Applicable.

 

13

Internal LGD grade

Y

 

Text

This column captures internal LGD grades and is applicable to exposures subject to the AIRB or the retail IRB approach. For all other exposures, report Not Applicable.

For ADIs that use discrete LGD grades for regulatory capital calculation, report the label given to the internal LGD grade (e.g. LGD1, LGD2, etc.).

For ADIs that assign continuous LGD estimates for regulatory capital calculation, the estimates must first be grouped into LGD bands for reporting purposes and then report the label given to each band (e.g. LGD1, LGD2, etc.). It is up to the ADI to determine the reasonable number of discrete bands for reporting purposes. The bands may be aligned with bands used internally for other purposes such as pricing.

The allocation of exposures to each LGD grade or band should be made after the application of regulatory floors on LGD.

For rows to which this column does not apply (e.g. slotted exposures), report Not Applicable.

14

Internal LGD estimate

 

 

Percentage to 3 decimal places

For each internal LGD grade in column 13, report the LGD estimate after the application of regulatory LGD floors. Where an ADI has formed LGD bands in column 13, report the exposure-weighted average LGD for each band after the application of regulatory LGD floors.

For rows to which this column does not apply (e.g. slotted exposures), leave this column blank.

15

Maturity (M) band

Y

 

  • <1 year
  •  Equal to 1 year
  • >1 to <=2 years
  • >2 to <=3 years
  • >3 to <=4years
  • >4 to <5 years
  • Equal to 5 years
  • Not Applicable

 

This column is applicable to sovereign, financial institution and corporate exposures except for rows where Exposure after CRM and CCF (column 19) is zero.

The <1 year band is for exposures that are exempt from the one-year maturity floor only.

The allocation of exposures to each effective maturity band should be made after the application of regulatory caps and floors on effective maturity.

For all other exposures, report Not Applicable.

16

Weighted average maturity (years)

 

 

Years to 3 decimal places

Report the exposure-weighted average effective maturity in years for each effective maturity band in column 15.

Note that the average should be calculated as the exposure (after CRM and CCF) weighted average at the unique identifier level.

For rows to which this column does not apply, including rows where Exposure after CRM and CCF (column 19) is zero, leave this column blank.

17

Weighted average firm size

 

 

Whole dollars

For Corporate - SME - IPRE and Corporate - SME - non-IPRE exposures, except for rows where Exposure after CRM and CCF (column 19) is zero, report the exposure-weighted average consolidated annual revenue for the purpose of calculating the firm-size adjustment.

Note that the average should be calculated as the exposure (after CRM and CCF) weighted average for each relevant row.

For all other exposures, leave this column blank.

18

Exposure before CRM and CCF

 

 

Whole dollars

For each row other than rows with Yes in column 2, report exposure before credit risk mitigation (CRM) and before CCF.

19

Exposure after CRM and CCF

 

 

Whole dollars

For each row other than rows with Yes in column 2, report exposure after CRM and after CCF.

20

Risk weighted assets (RWA) - Internal ratings-based (IRB)

 

 

Whole dollars

Report the RWA without the 1.1 scaling factor. Refer to Attachment A of APS 113.

For RWA overlays, refer to the instructions for column 2.

21

Scaled RWA

 

 

Whole dollars

APRA calculated field.

22

Expected loss (EL) amount

 

 

Whole dollars

Report the EL amount.

23

RWA - Standardised

 

 

Whole dollars

For each row and exposures reported in column 19, report the equivalent standardised RWA calculated in accordance with APS 112.

For RWA overlays, report the equivalent standardised RWA where relevant (e.g. an overlay associated with the exposure amount may have a standardised equivalent).

 

[1]  “securitisation exposure” is defined in accordance with APS 120.

[2]  Refer to paragraph 7 of this reporting standard.