Get a plain-English read of Off-balance sheet exposures
Turn the raw legal text into a practical explanation grounded in Financial Sector (Collection of Data) (reporting standard) determination No. 11 of 2006 - Reporting Standard ARS 222.0 - Exposures to Related Entities.
This refers to items of assets or liabilities that are not recognised or recorded on the statement of financial position of the ADI 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-IFRS, will continue to be treated as off-balance sheet items, post-IFRS.
Instruction guide for specific items
The form has the following reporting components:
Part A: 10 Largest exposures to related entities
Part A is to be completed by all locally incorporated banks and locally-incorporated non-bank ADIs (including SCCIs) on a licensed ADI or ELE basis (where applicable). Report in this part on a net basis (explained in detail below) the ADI’s/ELE’s (as appropriate) 10 largest exposures to individual related entities.
The following instructions are applicable to Part A of this form.
Name of entity
Report in column 1 the names of the relevant individual related entities to which the ADI/ELE (as appropriate) has exposures to.
Category
Report in column 2 the category of the related entity reported in column 1 using the following abbreviations:
ADI for related ADIs (including overseas based equivalents);
OR for other regulated related entities (i.e. any related entity other than an ADI or overseas based equivalent directly regulated by APRA or by a foreign equivalent); or
UR for unregulated related entities.
On-balance sheet exposures
Report all on-balance sheet exposures to the related entity noted in column 1. This includes all loans and advances to the related entity, equity investment in the related entity, and all other claims on the related entity. Any accrued interest associated with the exposure should also be included.
3.1 Equity investment
Report in column 3.1 the book value of equity investment in the related entity. Exclude any equity investment in the related entity that has been deducted from the ADI’s Level 1 (stand-alone) capital for capital adequacy purposes (see Prudential Standard APS 111 Capital Adequacy: Measurement of Capita (APS 111)).
3.2 Other
Report in column 3.2 the book value of all other on-balance sheet exposures to the related entity on a net basis. Net basis means net of exposures excluded under paragraphs 28(b)(ii)-(vi) in APS 222, specifically:
exposures deducted from the ADI’s Level 1 (stand-alone) capital for capital adequacy purposes (see APS 111);
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));
Subdivision Off-balance sheet exposures - Financial Sector (Collection of Data) (reporting standard) determination No. 11 of 2006 - Reporting Standard ARS 222.0 - Exposures to Related Entities - Off-balance sheet exposures | Zoe
exposures to the extent that they are guaranteed by governments, or secured by government securities (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.
Off-balance sheet exposures
4.1. Non-market related
This includes all commitments, whether revocable or not, which have been advised to the related entity 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). For SCCIs that are involved in self-acquiring of credit card transactions, include any potential chargeback exposures to the related entity (merchant).
Exclude:
internal limits that have not been formally advised to the related entity and may be cancelled at the ADI’s/ELE’s (as appropriate) discretion.
Report in column 4.1 the value of all unused commitments to the related entity (do not apply credit conversion factors or risk weightings to the value) on a net basis (i.e. net of exposures excluded under paragraphs 28(b)(ii)-(vi) in APS 222 as detailed in point 3.2 above).
SCCIs should use their own methodology in determining the amount of potential chargeback exposures to the related entity (e.g. this could be based on the SCCI’s historical trends of chargeback exposures to the related entity). Any funds held as performance bond from related entities 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.
4.2. Market related
Include:
all exposures arising from off-balance sheet market related contracts with the related entity reported in column 1 (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 28(b)(ii)-(vi) in APS 222 as detailed in point 3.2 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 (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.
Total exposures
5.1 Amount
This represents the total of column numbers 3.1, 3.2, 4.1 and 4.2.
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’ (i).
Memorandum items
(i) Capital base of licensed ADI
Report the ADI’s capital base at Level 1 for the reporting quarter (as shown in ARF 110.0 Capital Adequacy (Licensed ADI) for the same reporting quarter).
(ii) Aggregate exposure to all related ADIs (including overseas based equivalents)
Report the ADI’s/ELE’s (as appropriate) aggregate exposure to all related ADIs and related overseas based equivalents on a net basis (i.e. net of exposures excluded under paragraphs 28(b)(ii)-(vi) in APS 222 as detailed in points 3.1 and 3.2 above).
(iii) Aggregate exposure to all related entities other than related ADIs and related overseas based equivalents
Report the ADI’s/ELE’s (as appropriate) aggregate exposure to all related entities other than related ADIs and related overseas based equivalents on a net basis (i.e. net of exposures excluded under paragraphs 28(b)(ii)-(vi) in APS 222 as detailed in points 3.1 and 3.2 above).
Part B: 10 Largest exposures to ELE-eligible subsidiaries
Part B is to be completed by all locally incorporated banks and locally-incorporated non-bank ADIs (including SCCIs) that have APRA-approved ELE-eligible subsidiaries. Report in this part on a net basis (explained in detail below) the ADI’s 10 largest exposures to individual subsidiaries that form part of the ADI’s ELE (i.e. 10 largest exposures to ELE-eligible subsidiaries).
The following instructions are applicable to Part B of this form.
Name of entity
Report in column 1 the names of the relevant individual ELE-eligible subsidiaries to which the ADI has exposures to.
On-balance sheet exposures
Report all on-balance sheet exposures to the subsidiary noted in column 1. This includes all loans and advances to the subsidiary, equity investment in the subsidiary, and all other claims on the subsidiary. Any accrued interest associated with the exposure should also be included.
Equity investment
Report in column 2.1 the book value of equity investment in the subsidiary. Exclude any equity investment in the subsidiary that has been deducted from the ADI’s Level 1 (stand-alone) capital for capital adequacy purposes (see APS 111).
Other
Report in column 2.2 the book value of all other on-balance sheet exposures to the subsidiary on a net basis. Net basis means net of the following exposures:
exposures deducted from the ADI’s Level 1 (stand-alone) capital for capital adequacy purposes (see APS 111);
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 governments, or secured by government securities (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.
Off-balance sheet exposures
3.1 Non-market related
Include:
all commitments, whether revocable or not, which have been advised to the subsidiary reported in column 1 (see Attachment A to AGN 112.2 for examples of these commitments).
Exclude:
internal limits that have not been formally advised to the subsidiary and may be cancelled at the ADI’s discretion.
Report in column 3.1 the value of all unused commitments to the subsidiary (do not apply credit conversion factors or risk weightings to the value) on a net basis (i.e. net of exposures detailed in point 2.2 above).
3.2 Market related
Include:
all exposures arising from off-balance sheet market related contracts with the subsidiary reported in column 1 (see AGN 112.2 for examples of these contracts).
Report in column 3.2 the credit equivalent amounts of all market related contracts on a net basis (i.e. net of exposures detailed in point 2.2 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.
Total exposures
This represents the total of column numbers 2.1, 2.2, 3.1 and 3.2.
Memorandum item
Aggregate exposure to all ELE-eligible subsidiaries
Report the ADI’s aggregate exposure to all ELE-eligible subsidiaries on a net basis (i.e. net of exposures detailed in points 2.1 and 2.2 above).
Part C: Exposures to head office, overseas branches, Australian and overseas subsidiaries
Part C is to be completed by all foreign ADIs and SCCIs that operate as branches in Australia. Report in this part on a net basis (explained in detail below) exposures of the Australian branch to head office, to individual overseas branches, as well as to individual Australian and overseas subsidiaries of parent.
The following instructions are applicable to Part C of this form.
Name of entity
Report in column 1 the name of the entity to which the Australian branch has exposures to.
On-balance sheet exposures
This includes all loans and advances and all other claims on the entity noted in column 1. Any accrued interest associated with the exposure should also be included.
Report in column 2 the book value of all on-balance sheet exposures to the entity 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 governments, or secured by government securities (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.
Off-balance sheet exposures
3.1 Non-market related
Include:
all commitments, whether revocable or not, which have been advised to the entity reported in column 1 (see Attachment A to AGN 112.2 for examples of these commitments).
Exclude:
internal limits that have not been formally advised to the entity and may be cancelled at the branch’s discretion.
Report in column 3.1 the value of all unused commitments to the entity (do not apply credit conversion factors or risk weightings to the value) on a net basis (i.e. net of exposures detailed in point 2 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.
3.2 Market related
Include:
all exposures arising from off-balance sheet market related contracts with the entity reported in column 1 (see AGN 112.2 for examples of these contracts).
Report in column 3.2 the credit equivalent amounts of all market related contracts on a net basis (i.e. net of exposures detailed in point 2 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.
Total exposures
This represents the total of column numbers 2, 3.1 and 3.2.