Subdivision General directions and notes - Financial Sector (Collection of Data) (reporting standard) determination No. 15 of 2018 - General directions and notes | Zoe
Financial Sector (Collection of Data) (reporting standard) determination No. 15 of 2018
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This form is to be completed by all Australian-owned banks and foreign subsidiary banks, branches of foreign banks and other authorised deposit-taking institutions (ADIs) on a Domestic books basis.
The Domestic books of Australian-owned banks and foreign subsidiary banks, branches of foreign banks and other ADIs relates to the Australian books of the Australian ADI and has the following scope:
is an unconsolidated report of the Australian licensed ADI's operations/transactions that are booked inside Australia;
exclude offshore branches of the Australian licensed ADI from this reporting unit;
exclude offshore banking units based overseas from this reporting unit;
do not consolidate Australian and offshore controlled entities or associated entities that are not ADIs;
include Australian based offshore banking units of the licensed ADI; and
include transactions with non-residents recorded on Australian books.
Securitisation deconsolidation principle
Except as otherwise specified in these instructions, the following applies:
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;
(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; and
(c) the underlying exposures (i.e. the pool) under such a securitisation may be excluded from the calculation of the ADI’s regulatory capital (refer to APS 120). However, the ADI must still hold regulatory capital for the securitisation exposures[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 Reporting Form ARF 110.0.1 Capital Adequacy (Level 1) and Reporting Form ARF 110.0.2 Capital Adequacy (Level 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 exposures are to be reported as on-balance sheet assets in APRA’s regulatory reporting returns. In addition, these exposures must also be reported as a part of the ADI’s total securitised assets within Reporting Form ARF 120.2 Securitisation – Supplementary Items.
Reporting period
The form is to be completed as at the last day of the reporting month. Net purchases should be reported for the reporting month up to and including the last day of the reporting month. Australian-owned banks, foreign subsidiary banks, branches of foreign banks and other ADIs should submit the completed form to APRA within 10 business days after the end of the relevant reporting month.
Unit of measurement
Australian-owned banks, foreign subsidiary banks and branches of foreign banks are asked to complete the form in millions of Australian dollars rounded to one decimal place. Other ADIs are asked to complete the form 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:
foreign currency monetary items outstanding at the reporting date must be translated at the spot rate at the reporting date;[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]
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
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.
Timing
Report assets and liabilities, and transactions in assets and liabilities as at the date of change of ownership.
Netting
Unless otherwise specifically stated, institutions are to comply with the prerequisite for netting outlined in Australian accounting standards AASB 139, AASB 7 Financial Instruments: Disclosures and AASB 132 Financial Instruments: Disclosure and Presentation and any relevant prudential standards.
Term to maturity
References to term to maturity in this form are references to original term to maturity. Note that this approach differs from the treatment of debt securities (liabilities) on ARF 320.0 Statement of Financial Position (Domestic books) (ARF 320.0), which requires data on a residual maturity basis. This difference arises because the standards underlying this form are based on international statistical standards rather than accounting standards.
Valuation and currency conversion
Closing balances should be reported at market price effective at the reference date. Where denominated in foreign currency, market values in foreign currency should be converted to AUD at the spot rate effective as at the reference date.
For debt securities, the market price is the traded price quoted on the reference date. If the traded price does not take account of interest accrued up to the ex-coupon date but not yet payable, this interest accrued should be included. If the traded price is not available, other methods of approximation include (in order of preference):
using a market rate of interest (yield to maturity), the net present value of the expected stream of future payments associated with the securities;
for unlisted securities, the price used to value securities for accounting or regulatory purposes;
for discount, deep discount or zero coupon securities, the issue price plus amortisation of the discount; or
other mark to market method.
Net purchases is the net result of dealing in the securities, i.e. purchases less sales. Transactions should be reported at the transaction price in AUD, converted at the appropriate spot rate at the time of the transaction, before the addition or subtraction of transaction costs such as brokerage. Net purchases should include all financial transactions in debt securities, including any funds repaid by the issuer when a security held reaches maturity.
The market valuation of closing position and net purchases should include any interest accrued up to the ex-coupon date to reflect the total market value of the position or transaction.
Basis of preparation
Unless otherwise specifically stated, institutions are to comply with Australian accounting standards regarding the measurement of asset, liability and equity items.
Specific instructions
Refer to the sector definitions in the ARF 320.0 instructions as a general guide for reporting by sector. In particular, care should be taken to determine whether debt securities that appear to be issued by Sate, Territory and local government are actually issued by central borrowing authorities. State central borrowing authorities have taken over almost all bond issuance for funding required by State, Territory and local governments.
The items listed under ‘Include’ and ‘Exclude’ are examples and should not be taken as a complete list of items to be included or excluded.
Short term debt securities
Report all trading and investment securities with an original term to maturity less than or equal to than 1 year at market value.
Include:
bills of exchange, bank-accepted and other;
certificates of deposits with an original term to maturity of 1 year or less;
commercial paper including promissory notes and asset-backed commercial paper;
treasury notes;
other short-term commercial or financial paper;
short sold positions; and
short-term debt securities (stock) lent or sold under repurchase agreements (these amounts should also be reported in ARF 320.5 Securities subject to Repurchase and Resale and Stock Lending and Borrowing (ARF 320.5)).
Exclude:
short-term debt securities borrowed or purchased under resale agreements (these amounts should be reported in ARF 320.5); and
11am accounts and 24-hour money.
Short term debt securities: Bills of exchange - Bank accepted and other
Report bills of exchange at market value.
Include:
holdings of bills of exchange accepted by this ADI.
Short term debt securities: Non-residents
Report all trading and investment securities with an original term to maturity less than 1 year at market value.
Long term debt securities
Report all trading and investment securities with an original term to maturity of more than 1 year at market value. Report the net transactions during the month by sector of issuer (excluding transactions via repurchase/stock lending agreements).
Include:
convertible notes prior to conversion;
certificates of deposits with an original term to maturity of more than 1 year;
government and semi-government inscribed stock;
medium term notes, bonds, debentures and unsecured notes;
inflation-indexed bonds;
floating rate notes and other floating-rate debt securities;
asset-backed securities such as mortgage backed bonds;
credit-linked notes and other debt securities with embedded financial derivatives;
other long-term debt securities;
securities (stock) lent or sold under repurchase agreements (these amounts should be reported in ARF 320.5); and
short sold positions as a negative asset against the appropriate debt security item.
Exclude:
securities borrowed or purchased under resale agreements (these amounts should be reported in ARF 320.5); and
options, swaps, rights, warrants and other financial derivatives.
Reconciliation with ARF 320.0
Total debt securities held (market value)
The sum of:
total short-term debt securities held (ARF 320.1 Debt Securities Held (ARF 320.1)); and
total long-term debt securities held (ARF 320.1)
less the sum of:
short-term debt securities held and issued by non-residents (ARF 320.1); and
long-term debt securities held and issued by non-residents (ARF 320.1)
equals
the sum of:
trading securities - debt securities (ARF 320.0); and
investment securities - debt securities (ARF 320.0) adjusted from book value to market value.